DCIT Vs Shravan Kumar Harkaram Choudhary (ITAT Mumbai Bench)
An Excel Sheet Is Not A Money-Lending Licence & A Screenshot Cannot Grow 100 Times By AO’s Imagination-Additions U/s 69/69A/69C Need Corroboration
Background
The assessee carried on the business of trading in mobile accessories through his proprietorship concern, Patel Mobile. A search u/s 132 was conducted on 17 March 2021 in the Rubberwala/Bhajwad Group cases, covering the assessee’s business & residential premises. During the search, Excel files, loose papers & WeChat data from the mobile phone of an employee were recovered. Based substantially on this electronic material, the AO made huge additions u/s 69, 69A & 69C for alleged unaccounted loans, interest, purchases, sales, debtors, cash rent & stock difference. The CIT(A) granted substantial relief but retained certain additions, including estimated gross profit at 8% on alleged unaccounted turnover. Both the Revenue & the assessee filed appeals. The assessment proceedings arose from orders passed u/s 153A. [TaxGuru: Section 153A — No Additions Without Incriminating Material for Completed Assessments](https://taxguru.in/income-tax/section-153a-additions-incriminating-material-completed-assessments.html)
Deleted Excel Files & Alleged Loans
Two files bearing the name “NH.xlsx” were recovered from the assessee’s laptop, including one from deleted data. They contained worksheets titled “KK”, “Pankaj Bhai”, “after diwali”, “interest KK A/c”, “JRC”, “DP”, “G Power” & “Harshan”, with columns for opening balance, receipts, payments, closing balance & formula-based calculations.
The AO presumed that these entries represented cash loans aggregating to about ₹31.03 crore. He computed peak investments u/s 69 & corresponding interest income u/s 69A for all three years. The Tribunal observed that the Excel sheets did not use the words “cash” or “loan”. They contained no loan agreements, receipts, security particulars, repayment schedules, bank movements or supporting accounts. Some entries showed receipt & repayment on the same day, while another sheet reflected a commercially impossible negative cash balance.
The assessee denied ownership & explained that part-time accountants occasionally used the laptop. It furnished the names, PANs & addresses of persons appearing in the sheets. Despite possessing these particulars, the AO did not summon a single person or undertake third-party verification.
No matching cash, promissory notes, unaccounted assets, bank entries or corresponding business transactions were discovered. The magnitude of the alleged loans was also wholly disproportionate to the assessee’s disclosed business & financial capacity.
The Tribunal held that the presumptions u/s 132(4A) & 292C are rebuttable. Mere recovery of electronic data from a laptop does not conclusively establish its authorship, ownership or truthfulness. Following CBI v. V.C. Shukla, Common Cause v. Union of India & other decisions, it upheld the CIT(A)’s deletion of the peak loan additions & consequential interest.
Onyx Collections Transactions
The AO treated entries in another worksheet as unaccounted purchases from Onyx Collections & made additions u/s 69C for AYs 2020-21 & 2021-22.
However, the worksheet did not satisfactorily match the regular ledger. Invoice numbers, dates, amounts & bank entries did not fully reconcile. The AO neither examined Onyx Collections nor conducted an independent inquiry despite having its complete name & address.
The Tribunal deprecated the AO’s selective reliance on only those entries which supported the addition while ignoring mismatches that undermined the proposed inference. In the absence of complete correlation & independent corroboration, the additions u/s 69C were deleted for both years.
WeChat Screenshot Multiplied by 100
For AY 2020-21, the AO relied on screenshots of diary pages found in an employee’s mobile phone. Because a few figures in a smaller screenshot allegedly corresponded with figures in a larger screenshot, the AO assumed that all figures in the larger image were recorded in one-hundredth denomination. He multiplied them by 100 & treated ₹5.90 crore as unaccounted sales.
The Tribunal found that the screenshots carried different dates & materially different totals. The smaller image contained only five entries, while the larger one contained several entries. No complete diary was seized to establish full matching.
The multiplication by 100 was therefore based entirely on conjecture. Nevertheless, since the diary contained certain business-related workings, the figures actually appearing therein were accepted as unaccounted sales of ₹5,90,370. The AO was directed to restrict the addition to 8% gross profit on ₹5,90,370, without applying the imaginary multiplier.
Alleged Sundry Debtors
An Excel file titled “GrpSum-952.xls” contained the names of 247 parties with aggregate closing balances of ₹12,65,84,996. The AO treated this amount as unexplained money u/s 69A, while the CIT(A) regarded it as unaccounted turnover & sustained 8% as estimated profit.
The Tribunal found that the sheet lacked supporting context & the alleged debtors were never examined. There was no evidence establishing that the balances represented the assessee’s undisclosed debtors, money or business transactions.
Accordingly, the entire addition of ₹12.66 crore was deleted. Even the CIT(A)’s 8% profit estimation was held unsustainable because profit cannot be estimated on turnover whose very existence remains unproved.
Cash Rent & Stock Difference
The assessee’s challenge failed regarding cash rent of ₹2,40,000. Although he claimed payment for two godowns, no rent receipt, landlord confirmation, ledger account or payment proof was furnished.
The addition of ₹1,93,114 for stock difference was also sustained because no satisfactory reconciliation between the physical stock found during search & the subsequently furnished trial balance was produced.
Decision
All three Revenue appeals were dismissed. The assessee’s appeals were partly allowed, with major additions based on uncorroborated electronic data deleted, while cash rent & stock difference additions survived. The final operative paragraph records dismissal of the Revenue appeals for AYs 2019-20, 2020-21 and 2021-22 and partial allowance of the assessee’s appeals for AYs 2020-21 and 2021-22.
Key Takeaway
Section 292C permits a presumption—it does not manufacture proof. Deleted Excel sheets, loose papers & screenshots may trigger inquiry, but cannot sustain additions without authorship, context, third-party verification & evidence of actual transactions.
Electronic data may calculate numbers instantly; it cannot calculate undisclosed income without evidence.
Cases Discussed
- CBI Vs. V.C. Shukla & Others (Supreme Court) — (1998) 3 SCC 410.
- Common Cause Vs. Union of India (Supreme Court) — (2017) 394 ITR 220.
- Umacharan Shaw & Bros. Vs. Commissioner of Income-Tax (Supreme Court) — (1959) 37 ITR 271.
- Pooja Bhatt — 66 TTJ 817 (Mumbai Tribunal).
- Smt. Harmohinder Kaur Vs. DCIT (ITAT Amritsar) — [124 Taxman.com 68]. :contentReference[oaicite:7]{index=7}
- M/s Appu Direct Pvt. Ltd. — ITA Nos. 665 & 666/Chny/2023 and CO Nos. 37 & 38/Chny/2023, dated 24.01.2024.
- CIT Vs. Vivek Aggarwal — (2015) 56 Taxman.com 7 (Delhi High Court).
- Mohammed Ibrahim Mohideen Vs. ACIT (ITAT Bangalore) — [2024] 168 Taxman.com 385.
- PCIT Vs. Umesh Ishrani (Bombay High Court) — [2019] 108 Taxman.com 437.
- EI Resorts & Clubs Pvt. Ltd. Vs. DCIT (ITAT Mumbai) — [2025] 180 Taxman.com 338.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, MUMBAI BENCH
All these appeals are filed by the Revenue and Assessee against the common order of the Ld. Commissioner of Income tax (Appeals)-52, Mumbai, dated 27-11-2025 for the assessment years 2019-20, 2020-21 and 2021-22 arising out of the assessment orders passed u/s 153A of the Act.
2. Brief facts of the case are that the assessee is engaged in the business of trading in mobile accessories in the name of “Patel Mobile” which is a proprietorship concern. The assessee filed returns of income declaring total income in the original returns for the assessment years 2019-20 to 2021-22 as under:
| Particulars | AY 2019-20 | 2020-21 | 2021-22 |
|---|---|---|---|
| Return filed on | 21-08-2019 | 26-11-2020 | 26-02-2022 |
| Returned income | Rs.35,52,230 | Rs.49,59,680 | Rs.3,88,860 |
3. A search and seizure action u/s 132 of Act was carried out on 17-03-2021 on Rubberwala Group and Others (including Bhajwad Group). During the search proceedings business premises as well as residential premises of the key persons of the group were also covered by way of search action u/s 132 of the Act.
4. During the search certain excel sheet, loose papers were recovered from the premises of the assessee. Further ‘we-chat’ was also found in mobile phone if the employee one Mr. Suraj Patel. During the assessment proceedings the Assessing officer made the following additions which is summarized in the following table:
| Addition on account of | A.Y 2019-20 | A.Y 2020-21 | A.Y 2021-22 | CIT(A) |
|---|---|---|---|---|
| Return Income | 35,52,230/- | 49,59,680/- | 3,88,860/- | |
| A. Unexplained Investment u/s 69 – Excel Sheet found in respect of Loan whereas Peak of Loan Amount | 7,00,67,699/- | 20,09,74,534/ | 1,28,72,009/- | Deleted 100% |
| B. Unexplained Money u/s 69A – Interest earned on Above loan | 8,47,508/- | 2,53,37,998/- | 2,18,178/- | Deleted 100% |
| C. Unexplained Expenditure u/s 69C – out of books transactions with Onyx Collections | — | 41,74,630/- | 1,44,50,000/- | Sales estimated than no expenses addition needs for the A.Y 2020-21 and A.Y. 2021-22 |
| D. Unexplained money – Out of book Turnover | — | 5,90,37,000/- | — | GP determined @ 8% |
| E. Unexplained Expenditure u/s 69C – Cash Rent | — | — | 2,40,000/- | 100% Confirmed |
| F. Unexplained Investment u/s 69 : Difference in Stock | — | — | 1,93,114/- | 100% Confirmed |
| G. Unexplained Money u/s 69A – Excel Sheet found for Sundary Debtor | — | — | 12,65,84,996/- | GP determined @ 8% |
| Assessed Income | 7,44,67,437 | 29,44,83,842/- | 15,49,47,157/- |
5. Aggrieved by the assessment order, the assessee preferred appeals before the Ld. CIT(A) who partly allowed the appeals of the assessee. As is evident from the above table, the Ld. CIT(A) while disposed off the appeals partly allowed the appeals of the assessee as under:
i) Deleted the addition made in respect of the alleged loan transactions and the consequential interest thereon for the assessment years 2019-20 and 2020-21;
ii) Sustained the addition U/s 69C for assessment year 2021-2022 with respect to Onyx Collections which was treated as out of book transactions. However, deleted the addition u/s 69C for the assessment year 2020-21 holding that since sales were estimated no disallowance be made for expenses.
iii) Estimated the gross profit at 8% on adhoc basis on the alleged unaccounted turnover of Rs.5.90 crore for the assessment year 2021-22.
iv) Estimated the gross profit at 8% on adhoc basis on the alleged Sundry Debtors balances of Rs.12,65,84,996/- u/s 69A based on Excel Sheet.
v) Sustained the additions of Rs.2,40,000/- and Rs.1,93,114/- for assessment year 2021-22 in respect of cash rent and stock differences.
6. Aggrieved by the order passed by the Ld. CIT(A), the Revenue has preferred appeals for assessment years 2019-20, 2020-21 and 2021-22, raising the following grounds of appeal:
Asst. Year: 2019-20 (ITA No.989/Mum/2026)
“1. Whether the Ld. CIT(A) erred in law and on facts in deleting the additions made under Section 69 on account of unexplained investment recorded in the Excel files (“NH.xlsx”) seized during search, without appreciating that the statutory presumption under Sections 132(4A) and 292C applies and shifts the onus to the assessee only after independent evidence is produced to rebut it.”
2. “Whether the Ld. CIT(A) erred in law and on facts in relying on the self-serving explanation of the appellant and the statement of a third-party accountant as sufficient to rebut the statutory presumption, without any corroboration from other records OR confirmation from the alleged clients.”
3. “Whether the Ld. CIT(A)erred in law and on facts in disregarding the evidentiary value of the structured and detailed Excel sheets, which contained ledger entries, balances, receipts, payments, and interest computations, and treating them as “dumb documents” by relying on precedents concerning loose papers and unverified notes and directed to delete the peak component of Rs.7,09,15,207/-. Including the interest amount of Rs.8,47,508/-”
Asst. Year: 2020-21 (ITA No.990/Mum/2026)
“1. “Whether the Ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 20,09,74,534/- made under section 69 of the Income-tax Act, 1961, on account of unexplained investment reflected in the incriminating Excel sheet titled “NH.xls” seized during search proceedings, without appreciating that the assessee failed to satisfactorily explain the nature and source of such investment.”
2. “Whether the Ld. CIT(A) erred in deleting the addition of Rs.2,53,37,998/- made under section 69A of the Act on account of unexplained money evidenced from the Excel sheet “NH.xls”, despite the assessee’s failure to discharge the onus cast upon it under the Act.”
3. Whether the Ld. CIT(A) erred in deleting the addition of Rs. 41,74,630/- mad under section 69C of the Act towards unexplained expenditure, ignoring the incriminating material found during search and the absence of any satisfactory explanation regarding the source of such expenditure.
4. “Whether the Ld. Commissioner of Income Tax (Appeals) erred in restricting the addition on account of unrecorded receipts of Rs.5,90,37,000/- to 8% thereof, thereby deleting the balance 92% amounting to Rs. 5,43,14,040/-, despite the fact that the unrecorded receipts were detected on the basis of incriminating material seized during search and the assessee failed to explain the nature and source of such receipts; the addition made by the Assessing Officer deserves to be fully restored under the provisions of the Income-tax Act, 1961.”
Asst. Year: 2021-22 (ITA No.991/Mum/2026)
“1. “Whether the Ld. Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 1,28,72,009/- made under section 69 of the Income-tax Act, 1961, on account of unexplained investment reflected in the incriminating Excel sheet titled “NH.xls” seized during search proceedings, without appreciating that the assessee failed to satisfactorily explain the nature and source of such investment.”
2. “Whether the Ld. CIT(A) erred in deleting the addition of Rs. 2,18,178/- made under section 69A of the Act on account of unexplained money evidenced from the Excel sheet “NH.xls”, despite the assessee’s failure to discharge the onus cast upon it under the Act.”
3. “Whether the Ld. CIT(A) erred in deleting the addition of Rs. 1,44,50,000/- made under section 69C of the Act towards unexplained expenditure, ignoring the incriminating material found during search and the absence of any satisfactory explanation regarding the source of such expenditure.
4. “Whether the Ld. Commissioner of Income Tax (Appeals) erred in restricting the addition on account of unrecorded receipts u/s. 69Aof Rs. 12,65,84,996/- to 8% thereof, thereby deleting the balance 92% amounting to Rs. 11,64,58, 196/-, despite the fact that the unrecorded receipts were detected on the basis of incriminating material seized during search and the assessee failed to explain the nature and source of such receipts; the addition made by the Assessing Officer deserves to be fully restored under the provisions of the Income-tax Act, 1961.””
7. The Assessee has also preferred appeals against the order of the Ld. CIT(A) for the assessment years 2020-21 and 2021-22 and has raised the following grounds:-
Asst. Year: 2020-21 (ITA No.1143/Mum/2026)
“1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in initiating and completing proceedings under section 153A of the Income Tax Act, 1961, which are without jurisdiction, invalid, and bad in law.
2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer, who failed to furnish the mandatory certificate as required under Section 65B of the Indian Evidence Act, 1872, in respect of the electronic records relied upon, thereby rendering such evidence inadmissible in law.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition based on alleged loose sheets and excel sheets found during the course of search, without appreciating that such documents, being unverified and unauthenticated, do not constitute reliable evidence.
4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in sustaining the impugned addition based merely on presumptions and assumptions, without bringing on record any independent corroborative material or evidence to substantiate the addition.
5. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in relying upon alleged WeChat screenshots purportedly obtained from an employee of the assessee, claimed to be a data backup of an iPhone 11 of Mr. Suraj Kumar Patel, without any corroborative evidence and in the absence of a valid certificate under section 65B of the Indian Evidence Act, 1872, thereby rendering such reliance untenable and bad in law.
6. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of ₹47,22,960/-, being 8% of *5,90,37,000/-, under the Act, based solely on uncorroborated and inadmissible evidence, rendering the addition arbitrary, unjustified, and bad in law.
7. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition solely on the basis of excel sheets which were neither corroborated with any other evidence nor supported by any independent inquiry, thus making the addition unsustainable in law.
8. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 41,74,630/- on account of payment made in cash to Onyx Collections which is based solely on excel sheet entries, without any supporting evidence or proper cross verification from the supplier, rendering the addition untenable in law.”
Asst. Year: 2021-22 (ITA No.1144/Mum/2026)
“1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in upholding the action of the Assessing Officer in initiating and completing proceedings under section 153A of the Income Tax Act, 1961, which are without jurisdiction, invalid, and bad in law.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the Assessing Officer, who failed to furnish the mandatory certificate as required under Section 65B of the Indian Evidence Act, 1872, in respect of the electronic records relied upon, thereby rendering such evidence inadmissible in law.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition based on alleged loose sheets and excel sheets found during the course of search, without appreciating that such documents, being unverified and unauthenticated, do not constitute reliable evidence.
4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in sustaining the impugned addition based merely on presumptions and assumptions, without bringing on record any independent corroborative material or evidence to substantiate the addition.
5. On the facts and in the circumstances of the case and in law, the learned on the basis of excel sheets CIT(A) erred in confirming the addition solely which were neither corroborated with any other evidence nor supported by any independent inquiry, thus making the addition unsustainable in law.
6. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition based on an alleged debtors’ Excel sheet, which was neither corroborated by any independent evidence nor verified through proper inquiry. The learned CIT(A) further failed to appreciate that no cross-verification or cross-examination was made from alleged debtors.
7. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of ₹1,01,26,800/-, being 8% of the alleged debtors amounting to 12,65,84,996/-, based solely on an alleged debtors’ Excel sheet, by treating as business income. The learned CIT(A) failed to appreciate that the said Excel sheet was neither corroborated by any independent evidence nor subjected to proper verification, and no nexus was established between the appellant and the alleged entries. The addition is thus arbitrary, without any evidentiary basis, and liable to be deleted.
8. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 1,44,50,000/- on account of payment made in cash to Onyx Collections which is based solely on excel sheet entries, without any supporting evidence or proper cross verification from the supplier, rendering the addition untenable in law.
9. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹2,40,000/- on account of alleged unexplained expenditure towards rent under section 69C of the Act, without appreciating the facts, evidences on record, and the explanations furnished by the appellant.
10.On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of ₹1,93,114/- on account of alleged excess stock treated as unexplained investment under section 69 of the Act, without properly considering the appellant’s submissions and without bringing any cogent material on record to justify the addition.
11.On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in making the impugned addition based purely on surmise and conjecture, without appreciating the material facts on record or bringing any cogent evidence on file to support the addition.”
8. We shall first take up the appeals filed by the revenue for assessment years 2019-20, 2020-21 and 2021-22, in respect of the ground Nos. 1 to 3 (A.Y. 2019-20); 1 and 2 (A.Y. 2020-21); 1 and 2 (A.Y. 2021-22), concerning the additions based on the impugned excel sheet, allegedly relating to the loan transactions and interest thereon as the grounds are common for all the three appeals of the revenue and also the corresponding grounds in assessee’s appeals.
9. The Ld. Departmental Representative (DR) invited our attention to the assessment order and submitted that, during the course of survey proceedings conducted on 17-03-2021 at the ground floor parking area of Rubberwala Fuego Tower, Grant Road, Mumbai, a backup was taken from an HP laptop belonging to the Assessee Shri Shravan Kumar Choudhary. The forensic examination of the said laptop resulted in the recovery of two excel files bearing the identical name “NH.xlsx”, one of which was retrieved from the deleted data of the laptop. The first file was stated to be 192 KB in size, whereas the second file was stated to be 23 KB in size. Referring to the extracts of the first excel file reproduced in the assessment order, the Ld. DR submitted that it contained several worksheets recording various transactions. According to Ld. DR, the worksheets reflected daily accounts containing fields such as “Date”, “Opening”, “Received”, “Paid” and “Closing”, along with an untitled field containing a formula. It was contended that the said formula calculated as amount at the rate of 0.05% on the daily closing balance by using the “MMULT” function.
10. The Ld. DR similarly referred to the other worksheets contained in the said excel file, namely sheet 2 titled “PANKAJ BHAI”, sheet 3 titled “after diwali”, and sheets 4 and 5 titled “interest kk ac”. Ld. DR further submitted that the assessee had identified the parties referred to in the worksheets and had furnished their names, PAN and addresses.
11. The Ld. DR further referred to another excel file bearing the same name, stated to be 23 KD in size, which contained worksheets titled “kk”, “jrc”, “dp” and “G Power”. According to her, these worksheets also contain daily accounts of transactions under the field “Date”, “Opening”, “Received”, “Paid” and “Closing”, together with an untitled field containing a formula. She submitted that the formula calculated an amount at the rate of 0.05% on the daily6 closing balance by using the “MMULT” function.
12. The Ld. DR further drew our attention to the seized material referred in assessment order and submitted that the Ld. CIT(A) had failed to properly appreciate the facts and circumstances of the case. Accordingly, it was contended that the addition made by the Assessing Officer deserved to be restored and confirmed.
13. The Ld. Counsel for the assessee supported the order of the Ld. CIT(A) and submitted that the same was well reasoned and had been passed after duly considering all the relevant facts and circumstances of the case. The Ld. CIT(A) had rightly deleted the addition upon finding that the entries contained in the impugned excel sheets were uncorroborated by any independent evidence. The Ld. Counsel further submitted that the assessee carried on business in the mobile accessories market, which is a common and largely unorganized market dominated by persons having limited formal education. In such a market the sharing and copying of data and the use of computers for taking printouts are common practices. It was further submitted that during the post search proceedings, vide submission dated 26-07-2021, the assessee had categorically denied the ownership of both the excel files.
14. The Ld. Counsel further submitted that neither the word “cash” nor any description indicating cash loan transactions appeared anywhere in the impugned excel sheets. Further, no admission regarding the ownership or contents of the said files was made by the assessee during the course of the search or post search proceedings.
15. The Ld. Counsel also explained that the part time accountant occasionally used the assessee’s computer system for taking printouts. Therefore, the impugned files might have been inadvertently saved in the assessee’s system and subsequently deleted. It was contended that, had the files actually belonged to the assessee and represented his business transacts, there would have been no reasons to delete them, since deletion would make the reconciliation and maintenance of the alleged accounts difficult. Accordingly, the mere recovery of deleted excel files from the assessee’s system, without any corroborative material, would not justify the addition.
16. The Ld. Counsel for the assessee submitted that mere entries and arithmetical calculations appearing in an excel sheet, without any particulars or supporting evidence, cannot lead to the conclusion that they represent actual loan transactions. The impugned excel sheet merely reflects rough workings and has no established nexus with any genuine business or financial transaction of the assessee.
17. The Ld. Counsel for the assessee submitted that the Ld. CIT(A) had rightly taken into consideration the fact that, in his statement recorded on oath on 06-08-2021, the assessee identified Mr. Bhavesh Solanki as a part-time accountant. In relation to the smaller excel file titled “NH.xls”, the assessee had also referred to Mr. Bunty Rajput, who was similarly engaged on a part-time basis for accounting work. It is submitted that merely because the excel sheets contain a tabular format with columns such as Date, Opening, Received, Paid, and Closing, along with a formula computing 0.05% on closing balances, it cannot be conclusively inferred that the transactions represent loans advanced by the assessee. In absence of corroborative evidence establishing ownership authorship, or actual execution of such transactions by the assessee, the presumption drawn by the department is unfounded and unsustainable in law.
18. Further Ld. Counsel for the assessee submitted that without prejudice to the above factual submissions, even a bare analysis of excel sheets clearly demonstrates that the entries contained therein cannot be treated as genuine records of loan transactions. It is pertinent to note that nowhere in the excel file it has been mentioned that the transactions represent loans or cash lending activities. The Assessing Officer has merely presumed that the entire relate to loans because one of the columns contains a formula calculating an amount at the rate of 0.05% on the closing balance. Such presumption, without any corroborative evidence, is wholly unsustainable in law.
19. Further Ld. Counsel for the assessee submitted that sheet titled “kk” reveals several unusual and impractical figures. It is evident from the excel sheet that the amount was received and repaid on the very same day. A genuine loan transaction normally involves a time gap between disbursement and repayment it is not ordinarily taken and squared up on the same day. When receipts and payments occur on the same date for the same amount, the transaction loses the essential characteristics of a loan. Accordingly, the impugned excel sheet does not support the contention that there was a loan transaction. It was also pointed out the presence of arbitrary figures itself creates serious doubt regarding the authenticity and practical utility of the alleged entries.
20. Further, Ld. Counsel for the assessee submitted that the sheet titled “after diwali” merely contains certain numerical figures without any narration, description, particulars of parties, nature of transaction or supporting details. In the absence of any meaningful information, threes entries cannot be relied upon for making addition under the Income Tax Act. The sheets titled “interest kk ac” merely contain certain calculations. It is submitted that merely because a mathematical formula has been used to compute an amount at the rate of 0.05% cannot automatically lead to the conclusion that the underlying transactions represent loans advanced by the Assessee. A formula in an excel sheet is only a computational tool and cannot, by itself, establish the character or genuineness of any transaction. It is respectfully submitted that none of the above sheets contain any supporting particulars such as name of borrowers, addresses, PAN numbers, loan agreements, acknowledgements, repayment schedules, security details or any evidence of actual movement of funds; In the absence of such primary evidence, the excel sheets remain nothing more than unverified electronic data incapable of establishing undisclosed income. It is further submitted that, during the course of the search, no documents whatsoever were found relating to any advancement of loans, and the said excel sheet was merely retrieved from deleted data. In the absence of contemporaneous documentary evidence, a deleted excel file, by itself, cannot be treated as reliable proof of loan transactions or undisclosed income. Ld. Counsel further submitted that during the course of assessment proceedings the Assessing Officer failed to summon or examine the concerned parties, namely shri Pankanj Bjhai (M/s Fusion Import Export Pvt. Ltd) proprietor of Shree Paten Enterprises (KK) and Shri Harshan (M/s Tanishka Telenet), despite having their PAN details on record. No independent inquiry or verification was conducted by the Assessing Officer to corroborate the entries reflected in the excel data. The mere observation that the assessee had business connections with the aforesaid parties cannot by itself establish the correctness or authenticity of the alleged loan transaction recorded in such data. When primary details such as PAN and identity of the parties were readily available, it was incumbent up the Assessing Officer to carryout proper verification and investigation by issuing summons or making third party inquiries. The failure to do so renders the conclusion drawn solely on the basis of unverified excel data unsustainable in law. It is a settled proposition that any addition must be supported by cogent material evidence, and not merely on assumptions or unverified data. In the present case, the Assessing Officer has not discharged this burden.
21. Further referring to sheet titled “jrc” Ld. Counsel submitted that it contains certain figures without complete dates or narration. More importantly, it reflects a negative closing balance of Rs.9,95,000/- as on 21-01-2019. It is submitted that if the sheet were genuinely recording cash transactions or cash loans, a negative cash balance would be commercially impossible. This inherent inconsistency clearly demonstrates that the sheet was not maintained as a genuine cash book or loan ledger. The sheet titled “G Power” merely contains certain dates without corresponding transaction details or complete monetary particulars. Such incomplete data cannot form the basis of any addition under the Act. In the absence of complete particulars such as dates, names of parties nature of transactions and corroborative evidence, no addition can validly be made merely on the basis of a suspicious and unverified excel sheet which is in the nature of a dumb document and has negligible evidentiary value. Any addition resting solely on such conjectures and presumptions, without proper enquiry, cross verification or compliance with evidentiary requirements applicable to electronic records, is wholly unsustainable in law and liable to be deleted.
22. In response to the submissions of the Ld. Counsel, the Ld. DR relied upon the findings of the Assessing Officer recorded in the assessment order and submitted that the assessment order be upheld.
23. We have heard the rival contentions and carefully perused the material available on record and the orders of the lower authorities. It is an admitted fact that the impugned excel sheets were recovered from the laptop of assessee during the course of the search proceedings. The limited dispute before us is whether the additions made by assessing officer can be sustained solely on the basis of the entries contained in such excel sheets without any supporting evidences. On examination, we find that excel sheets nowhere indicate that the entries recorded therein represent actual loan transactions undertaken by the assessee. The Ld. CIT(A) has also recorded a categorical finding that the entries in the excel sheets were not corroborated by any independent evidence. Ld. Counsel had pointed out several discrepancies and inconsistencies in the sheets bearing labels such as “KK”, “Pankaj Bhai”, “after diwali”, “interest KK A/c” and “HARSAN”. The explanation and supporting material furnished by the assessee demonstrated that the sheets contained several errors and inconsistencies. These circumstances indicate that the data was neither contemporaneous nor maintained in the regular course of the assessee’s business.
24. The Ld. CIT(A) while deciding the appeal correctly observed that various courts and tribunals consistently held that mere notings or entries appearing in loose sheets/papers, diaries or electronic files do not by themselves constitute sufficient evidence for making addition unless they are corroborated by independent evidence linking such entries with the assessee and establishing that the transactions were actually carried out. The Ld. CIT(A) rightly appreciated that no addition could be made merely on the basis of entries contained in the inactive or deleted excel file comprising several sheets labeled “KK”, “Pankaj Bhai”, “After Diwali”, “jrc”, “DP”, “G Power”, and “Harshan” particularly when no independent evidence linking those entries with the assessee was found. During the course of search no corroborative material/evidenced such as tally data, bank statements, promissory notes, cash books, receipts, corresponding ledger accounts, unaccounted assets or any other supporting documents were discovered to establish the existence of the alleged loan transaction aggregating to Rs.31.03 crores. Further, no corresponding business transaction, movement of cash, acquisition of assets, bank entry or other financial evidence connecting the assessee with the alleged transactions was found either during the search or in the post search proceedings. The magnitude of the alleged transactions was also wholly disproportionate to the assessee’s disclosed business operation, financial capacity and net worth. Moreover, the assessee discharged the initial burden by furnishing the names, PAN and addresses of the parties appearing in the excel sheets. During the post search and assessment proceedings, the assessee consistently explained that the tiles had been mistakenly saved on the laptop by a part time accountant. Despite the availability of completed particulars of the concerned parties, the Assessing Officer did not conduct any independent enquiry to verify the alleged transactions appearing in the deleted excel files.
25. In the absence of any independent and cogent evidence establishing that the entries in the excel sheets represented actual transactions undertaken by the assesseee the additions made by the Assessing Officer by computing peak amount U/s 69 of the Act and the alleged interest income thereon on such loans u/s 69A was rightly deleted by the Ld. CIT(A). The Ld. CIT (A) also placed reliance on the decisions of the Hon’ble Supreme Court in the cases of CBI Vs. VC Shukla & Others (1998) 3 SCC 410 and Common Cause Vs. UOI (2017) 394 ITR 220 (SC).
26. It is also an undisputed fact that the assessment order does not record the issuance of even a single notice to any of the parties named in the excel sheets for the purpose of cross verification. Once the assessee had furnished the names, PAN and addresses of such parties and had offered a specific explanation regarding the impugned files, it was incumbent upon the Assessing Officer to conduct appropriate enquiries before drawing an adverse inference. The Assessing Officer should not reject the assessee’s explanation merely on suspicion and make additions without carrying the verification process to its logical conclusion.
27. The Hon’ble Supreme Court in the case of Umacharan Shaw and Bros Vs. CIT [37 ITR 271] held that there were many surmises and conjectures and the conclusion was the result of suspicion which could not take the place of proof in these matters. It is settled law that suspicion, however strong, cannot take the place of evidence. Similarly, raising presumption itself does not amount to proof. Presumption however strong cannot take the place of evidence as held by the co-ordinate bench of Mumbai Tribunal in the case of Pooja Bhatt 66 TTJ 817 (Mum).
28. We observed that the Amritsar Bench of Tribunal in the case of Harmohinder Kaur Vs. DCIT [124 Taxman.com 68] held as under:-
“13. On the basis of the aforesaid judgments, we are of the view, diary seized during the survey/search operation, without corroboration, have no authenticity and therefore, cannot be relied upon. Even entry recorded in the diary qua amount of sale was not confirmed from the buyers of the property and without confirmation, question of any assumption or belief that the entry belongs to the assessee did not arise and hence entry found in diary without any corroborative evidence, cannot be made basis of addition. The authorities below in the instant case, made the addition only on the basis of surmises, suspicion and guess work. Hence, respectively following the judgments referred above we are unable to sustain the addition made by the Assessing Officer and affirmed by the Ld. CIT(A). Consequently we are inclined to delete the same, resultantly the appeal of the assessee is liable to be allowed.”
29. Thus the impugned excel sheet found at the assessee’s premises cannot, by itself, be relied upon as conclusive evidence, particularly when its contents are not contemporaneous, not corroborated by any independent or external material. The sheet merely contains rough workings and arithmetical calculations without complete particulars capable of establishing any actual transaction. At best, such an excel sheet could constitute a starting point for further investigation. However, in the absence of cross verification, independent enquiry or supporting evidence, it cannot form the sole basis for sustaining the impugned addition.
30. In view of the foregoing facts and circumstances, we find no infirmity in the well reasoned findings of the Ld. CIT(A). Accordingly, the deletion of the additions made by the Assessing Officer on account of peak amounts of both excel sheets as unexplained investments U/s 69 of the Act as well as the consequential additions towards interest u/s 69A of the Act for the assessment years 2019-20, 2020-21 and 2021-22, is upheld.
31. The next grounds of appeal in Revenue’s appeals for the assessment years 2020-21 and 2021-22 and the assessee’s corresponding appeals are ground Nos.3 and 8 respectively, which are in respect of addition/disallowance made U/s 69C towards unexplained expenditure, on account of alleged out of books purchases.
32. From the seized digital material, an excel file named “Bhajwad.xls” was recovered, containing several worksheets titled SH, HB, MHB, GP, SK, NH, MP, BN, SHB, DT and “PAYMENT”. Except for the “PAYMENT” sheet, the other worksheets contained certain purported invoices, samples of which have been reproduced in the assessment order. The last worksheet, namely “PAYMENT”, was in the nature of a running account containing bills numbers allegedly cross referenced with the worksheets mentioned above, along with details of periodic payment stated to have been made through banking channels as well as in cash. For assessment year 2020-21, the Assessing Officer relied upon screenshots reproduced at pages 30-31 of the assessment order and made an addition of Rs.41,74,630/- in assessment year 2020-21 and Rs.1,44,50,000/- in assessment year 2021-22. The Ld. CIT(A) deleted the addition holding that there shall not be a separate addition made in respect of this expenditure as the addition on account of data backup of key employee Shri Suraj Patel has been confirmed to the extent 8% as unaccounted expenditure. However, otherwise the ground of Assessee for deletion of addition were rejected.
33. The Ld. DR drew our attention to the assessment order and submitted that upon comparison with the regular Tally data (Accounting data) of Shri Shravan Kumar Choudharay, the assessee, the payments made through banking channels appearing in the “PAYMENT” worksheet closely matched the corresponding entries in the ledger account of “Onyx Collections” maintained in the assessee’s regular books of account. The relevant extracts have been reproduced in the assessment order. The Ld.DR further referred to certain entries selected on a sample basis, which according to the revenue, were identically recorded both in the excel file and in the regular ledger account of Onyx Collections. On this basis, the Ld. DR contended that once the banking entries appearing in the excel worksheet stood corroborated by the regular books, the cash payments recorded in the same worksheet were also liable to be treated as unexplained payments made towards unaccounted purchases.
34. On the other hand, the Ld. Counsel for the assessee submitted that the alleged invoices contained in the excel file were merely drafts, estimates or proposals and did not represent actual payments. It was explained that M/s Patel Mobile, the proprietary concern of Shri Shravan Choudary, had admittedly purchased goods from M/s Onyx Collections, however, the worksheets titled SH, HB, MHB and others contained only proposed estimates relating to the possible supply or delivery of goods. The abbreviations used as worksheet names were merely internal identification mark and did not establish completed purchase transaction.
35. The Ld. Counsel further submitted that, in his statement recorded on oath on 6-8-2021, the assessee was confronted, vide question Nos.16 and 17 with the “PAYMENT” worksheet of the file “Bhajwad.xls”. It was put to the assessee that the worksheet contained a running balance and that certain bank payments recorded therein matched the payments made by the assessee to M/s Onyx Collections. The assessee, however, categorically denied that the worksheet represented the ledger account of M/s Onyx Collections and explained that it was merely a proposed payment plan prepared in contemplation of future deliveries of goods.
36. The Ld. Counsel further submitted that the invoice numbers and amount appearing in the sample excel invoices did not correspond with the invoice numbers recorded in the regular ledger account of M/s Onyx Collections seized or examined by the Department. This material discrepancy, according to him, demonstrated that the excel worksheets were merely preliminary workings or proposals and not records of actual purchases. No corresponding purchase invoices, delivery challans, transportation records, stock entries, acknowledgements, confirmation from M/s Onyx Collections or any other corroborative evidence were brought on record to establish that the alleged goods were actually purchased or delivered.
37. It was further contended that the Assessing Officer could not selectively rely upon matching bank entries to presume that every cash entry in the worksheet represented an actual payment. The genuineness of the banking entries recorded in the regular books did not, by itself, authenticate the disputed cash entries appearing in an independent and unverified excel worksheet. The Ld. Counsel also submitted that no certificate authenticating the electronic record in accordance with the applicable provisions governing electronic evidence was furnished or referred to in the assessment order. Ld. Counsel therefore prayed that the additions sustained for both assessment years be deleted in toto.
38. We have heard the rival contentions on this issue, perused the orders of the lower authorities and examined the seized excel file and the material placed in the paper book. The assessment order records that an excel file named “Bhajwad.xls” was recovered from the seized digital material. The file contained several worksheets titled SH, HB, MHB, GP, SK, NH, MP, BN, SHB, DT and PAYMENT. Certain sample invoices extracted from the said file have been reproduced at page 51 of the assessment order. These invoices contain, inter alia, the bill numbers and dates of delivery.
39. The Assessing Officer has also referred at page 52 of the assessment order, to the worksheet titled “PAYMENT”. The columns appearing therein are Date, Bill No., Marks, CTNS, Total and Payment. The worksheet is in the nature of a running account and records certain payments described as having been made through cash as well as banking channels.
40. The Assessing Officer compared certain bank payments appearing in the excel worksheet with the Tally data of Shri Shravan Kumar Choudhary and observed that a few such payments closely corresponded with entries appearing in the ledger account of “Onyx Collection” in the assessee’s regular books of account. A table containing a few entries selected on a sample basis was reproduced in the assessment order to demonstrate the alleged correspondence between the excel worksheet and the Onyx Collection ledger.
41. We have also examined the paper book filed by the assessee on 24.6.2026. The ledger account of Onyx Collection is placed at pages 51 to 53 of the paper book and was also available with the investigation wing as well as the Assessing Officer. The said ledger, which has also been reproduced at pages 53 and 54 of the assessment order contains purchase invoice numbers beginning with “OC-12100619” and “V&U 2019-20-145”. In contrast, the bill numbers appearing in the “PAYMENT” worksheet include 78, 13, 27, 36, 49, 62, 69, 81, 90, 25 and 33. None of these bill numbers corresponds with the invoice numbers appearing in the regular ledger account of Onyx Collection.
42. We further find that all the bank entries appearing in the excel worksheet do not correspond with the entries recorded in the ledger account of Onyx Collection. If the excel worksheet genuinely represented a running account of purchases from Onyx Collection, the material particulars such as invoice numbers, dates, accounts and payments would originally have shown a consistent and complete correlation with the regular ledger. The matching of only a few bank payment entries on a sample basis, in the absence of any matching invoice numbers or complete reconciliation cannot by itself establish that the remaining entries represented unaccounted cash purchases made by the assessee.
43. We have also observed from the assessment order that despite having the complete name and address of Onyx Collection, neither the Investigating Officer nor the Assessing officer examined its proprietor, partner, employee or any other responsible person to ascertain the ownership and authenticity of the impugned excel file or to verify the alleged cash transactions recorded therein. No confirmation, statement, receipt, delivery challan, corresponding sales record, transportation document, stock register or any other corroborative evidence was brought on record. The assessment order also does not disclose that the assessing Officer conducted any independent enquiry or verification with Onyx Collection regarding the alleged unaccounted cash purchases.
44. We further find from paragraphs 12.4 and 12.5 at page 55 of the assessment order for assessment year 2021-22 that, during the post search proceedings, the assessee’s statement on oath was recorded on 6-8-2021 and in response to questions nos.16 and 17, the assessee was confronted with the “PAYMENT” sheet contained in the file “Bhajwad.xls”. The assessing officer pointed out that the said sheet reflected a running balance and that certain bank payments recorded therein corresponded with payments made by Shri Shravan Kumar Choudhary to Onyx Collections. The assessee, however, categorically denied that the impugned sheet constituted the ledger account of Onyx Collections. Assessee consistently explained that it merely contained a tentative payment plan or proposal relating to the future delivery of goods. Thus, at no stage did the assessee admit that the impugned excel sheet was the ledger account of Onyx Collection or that the entries recorded therein represented actual concluded transactions.
45. The Assessing Officer appears to have merely proceeded on the basis of the material and conclusion contained in the investigation report without independently examining the entire data or carrying the enquiry to its logical conclusion. Once the Assessing Officer possessed certain material suggesting a possible connection with Onyx Collection, it was incumbent upon him to conduct the necessary enquiry and verify the transactions from the alleged supplier. A few selectively matched bank entries cannot substitute for such verification or justify the presumption that all the unmatched entries represented unaccounted cash purchases.
46. We further find that the impugned excel sheet which the assessing officer treated as a running ledger account of Onyx Collection, contains particulars of dates, bill numbers, quantities/cartons and invoice totals. The relevant entries (extract of excel sheet reproduced at pages 52-53 of assessment order for AY 2021-22) are summarized below:
| Date | Bill No. | QTY/CTNS | Total |
|---|---|---|---|
| 02-Dec | 78 | 46 | 220932 |
| 09-Dec | 13 | 61 | 303430 |
| 14-Dec | 27 | 62 | 364333 |
| 16-Dec | 36 | 98 | 479331 |
| 23-Dec | 49 | 157 | 782302 |
| 30-Dec | 62 | 94 | 454139 |
| 04-Jan | 69 | 148 | 718812 |
| 08-Jan | 81 | 82 | 380992 |
| 09-Jan | 90 | 152 | 805030 |
| 22-Jan | 25 | 54 | 278122 |
| 25-Jan | 33 | 14 | 79800 |
47. Further we are reproducing the regular ledger account of Onyx Collection referred to by the Investigation Officer as well as Assessing Officer while comparing with above data. The said ledgers relevant extract (page 51-53 of paper book) mentioned as below;
| Date No. | Vch Type | Vch No. | Invoice value |
|---|---|---|---|
| 10-06- 2019 | Purchase | OC12100619 | 178,475.00 |
| 28-06- 2019 | Purchase | OC28062019 | 40,017.00 |
| 01-11- 2019 | Purchase | v&u2019-20105 | 3,20,960.00 |
| 09-11- 2019 | Purchase | v&u2019-20119 | 4,01,200.00 |
| 06-12- 2019 | Purchase | v&u2019-20145 | 3,82,910.00 |
| 07-12- 2019 | Purchase | v&u2019-20146 | 4,18,900.00 |
| 09-12- 2019 | Purchase | v&u2019-20147 | 1,95,083,50 |
| 19-12- 2019 | Purchase | v&u2019-20152 | 3,09,460.90 |
| 23-12- 2019 | Purchase | v&u2019-20154 | 2,98,551.80 |
| 24-12-2019 | Purchase | v&u2019-20155 | 2,12,990.00 |
| 02.01.2020 | Purchase | v&u2019-20156 | 3,30,990.00 |
| 06.01.2020 | Purchase | v&u2019-20159 | 3,35,120.000 |
| 08.01.2020 | Purchase | v&u2019-20161 | 3,35,120.00 |
| 11.01.2020 | Purchase | v&u2019-20164 | 4,60,790.00 |
| 14.01.2020 | Purchase | v&u2019-20165 | 1,44,207.80 |
| 15.01.2020 | Purchase | v&u2019-20166 | 4,60,790.00 |
| 20.01.2020 | Purchase | v&u2019-20170 | 4,49,795.94 |
| 22.01.2020 | Purchase | v&u2019-20172 | 4,10,097.20 |
| 24.01.2020 | Purchase | v&u2019-20173 | 3,35,120.00 |
| 01.02.2020 | Purchase | v&u2019-20175 | 4,05,300.50 |
| 03.02.2020 | Purchase | v&u2019-20176 | 4,64,778.40 |
| 02.03.2020 | Purchase | v&u2019-202 | 3,89,242.00 |
| 03.03.2020 | Purchase | v&u2019-203 | 3,22,651.00 |
| 04.03.2020 | Purchase | v&u2019-204 | 3,22,651.00 |
| 05.03.2020 | Purchase | v&u2019-205 | 4,62,183.00 |
| 01.06.2020 | Purchase | v&u2020-1 | 1,02,973.00 |
| 12.06.2020 | Purchase | v&u2020-2 | 4,83,180.00 |
| 13.06.2020 | Purchase | v&u2020-3 | 4,96,381.00 |
| 18.06.2020 | Purchase | v&u2020-4 | 4,23,054.00 |
| 01.07.2020 | Purchase | 0c01072020-4 | 3,46,139.00 |
| 02.07.2020 | Purchase | 0c02072020-2 | 4,56,617.00 |
| 03.07.2020 | Purchase | 0c03072020-3 | 3,55,397.00 |
| 04.07.2020 | Purchase | 0c04072020-1 | 3,44,142.00 |
| 02.08.2020 | Purchase | 0c02082020-1 | 3,50,351.00 |
| 07.08.2020 | Purchase | 0c07082020-1 | 3,29,706.00 |
| 01.10.2020 | Purchase | 0c01102020-1 | 3,10,111.76 |
| 03.10.2020 | Purchase | 0c03102020-1 | 3,91,082.46 |
| 05.10.2020 | Purchase | 0c05102020-1 | 2,99,830.76 |
| 09.11.2020 | Purchase | 0c09112020-1 | 2,73,185.00 |
| 12.11.2020 | Purchase | 0c12112020-1 | 2,30,468.00 |
| 16.11.2020 | Purchase | 0c16112020-1 | 2,88,169.00 |
| 16.12.2020 | Purchase | 0c16122020-1 | 3,15,886.00 |
| 17.12.2020 | Purchase | 0c17122020-1 | 3,22,782.00 |
| 22.12.2020 | Purchase | 0c22122020-1 | 3,36,595.00 |
| 14.01.2021 | Purchase | OC14012021-1 | 5,02,090.00 |
| 22.01.2021 | Purchase | OC22012021-1 | 5,01,677,.00 |
| 29.01.2021 | Purchase | OC29012021-3 | 5,02,562.00 |
| 02.02.2021 | Purchase | OC02022021-1 | 3,35,415.00 |
| 04.02.2021 | Purchase | OC04022021-1 | 2,84,616.00 |
| 10.02.2021 | Purchase | OC01022021-1 | 1,95,703.00 |
| 17.02.2021 | Purchase | OC01722021-1 | 2,39,363.00 |
| 23.02.2021 | Purchase | OC02322021-1 | 1,78,180.00 |
| 26.02.2021 | Purchase | OC02622021-1 | 2,79,778.00 |
48. Upon comparing the aforesaid entries in the regular ledger account of Onyx Collection relied upon by the Investigation Officer and also the Assessing Officer, we find that none of the invoice amounts appearing I the alleged running ledger matches the corresponding purchase entries recorded in the regular ledger account of Onyx Collection matched. The Assessing Officer has selectively relied upon only those features of the excel sheet that support the Revenue’s inference while disregarding the material inconsistencies contained therein. If the alleged matching of certain bank payments is relied upon to treat the excel sheet as the assessee’s ledger account of Onyx Collection, the corresponding bill numbers, invoice amounts, quantities and purchase entries must also reconcile with the regular ledger accounts and invoices. In the absence of such reconciliation, the mere matching of certain bank payments cannot establish that the entire excel sheet represents transactions with Onyx Collection. Such selective reliance accepting favorable entries while ignoring material discrepancies amounts to impermissible cherry picking and cannot form a valid basis for sustaining the impugned addition.
49. Further identical issue came up for consideration before the Chennai Bench of the Tribunal in the case of M/s Appu Direct Pvt. Ltd., in ITA Nos.665 & 666/Chny/2023 and CO Nos.37 & 38/Chny/2023 dated 24.01.2024 wherein the Tribunal held as under:
“11. The revenue contended that since, bank entries in seized excel sheets are matched with books of accounts, cash transactions recorded in excel sheets should be considered as belongs to the assessee. In our considered view, the contention of the department that merely because the notings of bank transactions in the excel sheet have matched with the bank statements it does not mean that the notings of cash transactions are also genuine. The reason is that though bank statements serves as corroborative evidence for proving transfer entries, but there are no corroborative evidence like sale bills, cash receipts and invoices etc in the cash entries in excel sheets. Notings by way of cash transactions are highly suspicious in nature because they are susceptible for embezzlement and also prone to create prejudice to the concerned parties. Therefore, in our considered view, the reasons given by the AO to make additions u/s. 69A of the Act on the basis of entries in excel sheets without any corroborative evidence is incorrect. Further, had the department proved at least some of the entries of cash transactions noted in the excel sheet with proper corroborative evidence, one can extrapolate the same to all other entities of cash transactions in the seized excel sheets. But in the present case, the AO has failed to link any cash transactions recorded in excel sheet with any other corroborative evidence which means the cash transactions alleged to be recorded in excel sheet cannot be considered as transactions of the assessee.”
50. However, in the case of the assessee before us, we find that the Assessing Officer adopted pick and choose method while framing the assessment. It is a well settled position of law that the documents, entries in the diaries found and seized during the course of search and seizure action should be read in its entirety. It is not permissible to adopt pick and choose method by using that part of the contents of the diary which is beneficial to the Revenue and reject the other contents of the diary which are detrimental to the Revenue.
51. The Hon’ble High Court of Delhi in the case of CIT Vs. Vivek Aggarwal (2015) 56 Taxman.com 7, held as under:
“It is well settled that even though the revenue authorities including the Assessing Officer has unfettered discretion and not strictly bound by the rules and pleadings as well as materials on record and is legitimately entitled to act on the material which may not be accepted as evidence, nevertheless such discretion does not entitle them to make a pure guess and base an assessment entirely upon it without reference to any material or evidence at all. Given the above state of law there is no hesitation in concluding that since the document seized as both undated and unsigned and even taken at face value did not lead to further enquiry on behalf of Assessing Officer, the ITAT’s view which endorsed the findings of the Commissioner (Appeals) were well-founded and did not call for interference.”
52. The Benguluru Bench of Tribunal in the case of Mohammad Ibrahim Mohideen Vs. ACIT [168 Taxman.Com 385], held as under:
“4.17 The unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words “may be presumed” in section 132(4) gives an option to the Assessing Officer concerned to presume these things, but it is rebuttable and it does not give a finite authority and conclusive evidence. The assessee is having every right to rebut the same. The entire case depends upon the rule of evidence. There is no conclusive presumption with regard to unsubstantiated seized material to come to the conclusion that assessee has unaccounted transactions. In the present case, the assessee categorically denied unaccounted transactions. The assessing Officer cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong, cannot take place the material in place of evidence brought on record. The Assessing Officer should act in a judicial manner, proceed in a judicial spirit and come to the judicial conclusions. The Assessing Officer is required to act fairly as a reasonable person, not arbitrarily and capriciously. The assessment under section 153C should have been supported by adequate material and it should stand on its own leg. This notebook or loose sheets found during the course of search is only circumstantial evidence and not full proof evidence to sustain the addition. No addition can be made in the absence of any corroborative material. If it is circumstantial evidence I the form of loose sheets and notebook, it is not sufficient to come to the conclusion that there is conclusive evidence to hold that assessee has any unaccounted transactions. The notes in the diary/loose sheets are required to be supported by corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated wrigings in the loose papers found during the course search cannot be sustained. The evidence on record is not sufficient to uphold the stand of Assessing Officer that assessee has unaccounted transaction.
4.18 …………………………………………………………
4.19 Being so, the seized material relied by the Assessing Officer for sustaining addition is not speaking one in itself and also not speaking in conjunction with some other evidence which the authorities found during the course of search or post search investigation. Thus, the well settled legal position is that a non-speaking document without any corroborative material, evidence on record and finding that such document has not materialized into transactions giving rise to income of the assessee which had not been disclosed in the regular books of account of the assessee has to be disregarded for the purpose of assessment to be framed pursuant to search and seizure action. In these cases, moreover the documents are relied upon b the Assesing Officer without confronting to any parties i.e seller or buyer of unaccounted transactions. These documents cannot bring assessee into tax net by merely pressing to service the provision of section 132(4A) read with section 292C, which creates deeming fiction on the assessee subject to search wherein it may be presumed that any such document found during the course of search from the possession and control of such document are true. What has to be noted here is that deemed presumption is rebuttable one and the deemed provisions have no help to the department. Therefore, in these cases addition is made by Assessing Officer on arbitrary basis relying on the loose papers, containing scribbling, rough and vague notings in the absence of any corroborative material and this material cannot be considered as transactions carried on by assessee giving rise to income which are not disclosed in the regular books of account by assessee.”
53. The Hon’ble High Court of Bombay in the case of PCIT Vs. Umesh Ishrani (2019) 108 Taxman.com 437, held that the entries of the loose papers which were seized were not corroborated with any other evidence on record and no enquiry or verification was made and thus no additions can be made U/s 69A of the Act.
54. In view of the above discussion and incomplete correlation between the excel worksheet and the regular ledger, in the absence of matching invoice numbers, the failure of the entire set of bank entries to reconcile and the complete lack of independent verification and corroborative evidence, the impugned addition cannot be sustained. Accordingly, we direct the Assessing Officer to delete the additions made towards unexplained expenditure U/s 69C of the Act for the assessment years 2020-21 and 2021-22. The grounds raised by the Revenue on this are rejected and the grounds raised by the Assessee on this issue are allowed.
55. We shall now take up the ground No.4 and ground No.6 of Revenue and Assessee respectively relating to the addition made on account of alleged unaccounted sales for the assessment year 2020-21 which were based on WeChat screenshots recovered from the mobile phone of the assessee’s employee one Mr.Suraj Kumar Patel.
56. The Ld. DR submitted that during the course of search proceedings a data backup of an iPhone 11 belonging to Mr. Suraj Kumar Patel an employee was found and seized on 20-03-2021 from Flat No.2201, Shaad Heights, Kamathipura, Mumbai. Upon examination of the said data backup, certain screenshots from the WeChat application were found showing communications with a contact saved as “Big Boss”. According to the Revenue, these screenshots contained entries relating to cash receipts and cash payments.
57. The Ld. DR further submitted that a small image of a diary page was visible in the bottom-right corner of the screenshots, containing certain figures described as “sales”. As per the original WeChat screenshots reproduced by the Assessing Officer at pages 40 and 42 of the assessment order for AY 2020-21, the figures appearing therein are as follows:
| Particulars | Cash received (Left Side) | Cash Paid (Right side) |
|---|---|---|
| Screenshot-01 | 1,87,356.85 | 3,30,443.80 |
| Screenshot-02 | 80,973.15 | 2,59,927.00 |
| Total | 2,68,330.00 | 5,90,370.80 |
58. The Ld. DR further submitted that certain entries appearing in the full sized screenshots matched entries recorded in the image of a small diary appearing at the bottom of those screenshots. According to Ld. DR, such matching established that the figures appearing in the full sized screenshots were recorded in 1/100th denomination and were therefore required to be multiplied by 100. On this basis Ld. DR contended that the assessing Officer has rightly treated the aggregate amount of Rs.5,90,37,000/- as the assessee’s unaccounted turnover. Ld. DR further argued that the Ld. CIT(A) had erred in restricting the addition to the gross profit element estimated at 8% and submitted that the entire amount of Rs.5,90,37,000/- ought to have been sustained as the assessee’s undisclosed income.
59. In reply, the Ld. Counsel for the Assessee submitted that the Ld. CIT(A) ought to have deleted the entire addition. Ld. Counsel submitted that the Ld.CIT(A) also proceeded on the erroneous presumption that merely because few entries matched with another diary, all the figures appearing in the screenshots were required to be multiplied by “100”. Consequently, even the addition sustained by applying a gross profit rate of 8% deserves to be deleted. The Ld. Counsel further submitted that the assessing officer without any cogent basis or corroborative evidence presumed that very figure appearing in the screenshots was recorded in 1/100th denomination and accordingly multiplied each figure by 100. On this basis, the aggregate amount of Rs.5,90,37,000/- was treated as the assesseee’s alleged unaccounted turnover. More importantly, the Assessing officer wrongly treated the figures appearing on the right had side which represented cash payments as cash receipts, despite the consistent explanation of Shri Suraj Kumar Patel that the figures on the left hand side represented cash receipts, while those on the right hand side represented cash payments.
60. The Ld. Counsel for the assessee further submitted that nowhere in the statement of Shri Suraj Kumar Patel recorded under section 132(4) of the Act, or in any other statement recorded during the search or assessment proceedings was it admitted that a figure such as “150” represented Rs.15,000/- or that the entries were maintained in 1/100th denomination. The inference that every figure was required to be multiplied by 100 was drawn solely by the Assessing Officer without any supporting material, admission, evidence or independent corroboration. Neither the assessee nor Shri Suraj Kumar Patel accepted such an interpretation at any stage of the proceedings.
61. Without prejudice to the above, the Ld. Counsel submitted that even if the entries appearing in the screen shots were taken into consideration though not admitted, the action of the assessing officer in multiplying every figure by 100 was wholly arbitrary, speculative and unsupported by any evidentiary basis. Neither the seized material nor the statements of Shri Suraj Kumar Patel or the assessee indicates that the figures were recorded in coded form or represented 1/100th of their actual value. The impugned inference is therefore founded entirely on conjectures and surmises and is legally unsustainable.
62. Ld. Counsel further submitted that the assessee had consistently explained that the larger page appearing in the screenshots related to petty-cash transactions maintained by Shri Suraj Kumar Patel for internal accounting purposes, wherein the entries on the left had side represented cash receipts and those on the right hand side represented cash payments. In contrast, the small embedded image of a diary page contained certain separate notings allegedly relating to sales for an altogether different purpose and period. The two sets of entries were independent and had no correlation with each other. The Revenue had not brought on record any cogent evidence establishing a nexus between the petty-cash entries and the notings appearing in the embedded diary image.
63. The Ld. Counsel further contended that the Assessing Officer attempted to correlate two unrelated sets of entries and thereafter extrapolated the figures by applying an arbitrary multiplier of 100. The entire exercise was based solely on assumptions and presumptions. It is a settled position of law that an addition under the Income Tax Act cannot be sustained merely on the basis of suspicion, conjectures, surmises or hypothetical inferences. In the absence of cogent, credible and independent corroborative evidence, the impugned addition deserves to be deleted.
64. It was further submitted that the alleged diary page was not an original document found or seized during the course of the search. It merely formed part of a screenshot recovered from the mobile device of a third party. The Revenue either recovered the original diary nor identified its author or owner. It also failed to establish the date of its preparation, the purpose for which it was maintained or the circumstances in which its image came to be stored on the mobile device. Such an isolated, fragmentary and context less image constituted nothing more than a “dumb document” and in the absence of independent corroboration, possessed no evidentiary value for relying on and making the impugned addition.
65. The Ld. Counsel further submitted that the Revenue had not produced any certificate under section 65B of the Indian Evidence Act, 1872 in respect of the electronic evidence relied upon by the Assessing Officer. It was contended that in the absence of the prescribed certification, the screenshots extracted from the mobile-data backup did not satisfy the statutory requirements governing the admissibility and authenticity of electronic records. Furthermore, the Revenue failed to establish an unbroken chain of custody relating to the seizure, preservation, extraction, forensic examination and analysis of the electronic data until its production before the Assessing Officer. Consequently, the authenticity, integrity and reliability of the electronic record remained wholly unsubstantiated.
66. The Ld. Counsel further alternatively, and without prejudice to the foregoing submissions, submitted that even if the contents of the screenshots were accepted for the sake of argument, though not admitted, the document was required to be read as a whole and could not be relied upon selectively. The screenshots reflected aggregate cash receipts of only Rs.2,68,330.00 on the left hand side and aggregate cash payment of Rs.5,90,370.00 on the right hand side. The Assessing Officer disregarded the nature of these entries, erroneously treated the cash payments as cash receipt and thereafter artificially inflated the figures by applying an arbitrary multiplier of 100. Such a selective and presumptive approach was legally impermissible. Even otherwise, the entries, at their highest, could indicate only business transactions or turnover and not undisclosed income in their entirety. It is a settled principle of taxation that the entire turnover or gross receipts cannot be assessed as income; only the profit element embedded therein is liable to be brought to tax. Accordingly, even if the alleged entries were accepted, the addition could, at the highest, be restricted to the profit element attributable to the aggregate cash receipts of Rs.2,68,330/- only, after applying an appropriate and reasonable gross profit rate.
67. We have heard the rival submissions, carefully perused the orders of the authorities below and the seized materials and statements recorded during the course of search and post search proceedings which were placed in the paper book placed before us.
68. For ready reference, we consider it appropriate to reproduce the relevant portion of the statement of the assessee’s employee Mr. Suraj Kumar Patel, recorded on 20-03-2021. The relevant questions put to him and his answers to the questions are as under:
“Q.64: I am showing you a screenshot dated 29th August 20189 from your iphone from Wechat name Big Boss in your iphone. Kindly confirm the same.
Xxxx
Q.65 Who is big boss in the above mentioned WeChat?
Ans. Sir, big boss name saved in my WeChat is Mr. Shravan Choudhary.
Q.66 In the WeChat mentioned in Q. No. 64 of this statement, kindly explain the content of screenshot?
Ans. This screenshot is the status of cash received / paid for a period of 30-45 days in M/s. Patel Mobiles written in the paper on 24.08.2019. Amounts and name mentioned on the left hand side in the screenshot is the cash reccivedand amounts mentioned on the right hand side are the cash paid.
Q.67 From the content of the screenshot, it is seen that cash received from 234 is mentioned as Rs. 9. Kindly explain the same.
Ans. Sir 234 mentioned in the screenshot is the shop number 234 in City Centre Mall who used to buy material in cash from M/s. Patel Mobile and M/s. Gopal Telecom and 9-00 mentioned is the amount Rs. 9.
Q.68 It is seen that at the bottom of the screenshot, a small notepad is kept wherein amount against 234 is written as Rs. 900? Kindly explain the same?
Ans. Sir, all the receipts from the cash sales are handled by Mr. Shravan Choudhary. So, Mr. Shravan Choudhary will be the right person to explain the difference in amounts.
Q.69 Kindly provide name, address, contact number & PAN of the shop owner of shop 234 mentioned in answer to question no. 64 of this statement.
Ans. Sir, he was a random shop owner who used to come for cash purchase. I do not have any detail available of shop owner of shop 234.
Q.70 From the content of the screenshot, it is seen that cash received from 3389 is mentioned as Rs. 150-00, 3391 is mentioned as 105=00. Kindly explain the same.
Ans. Sir 3389 & 3391 mentioned in the screenshot is the shop number 3389 & 3391 in City Centre Mall who used to buy material in cash from M/s. Patel Mobile and M/s. Gopal Telecom and 150-00 mentioned is the amount Rs. 150&Rs. 105.
Q.71 It is seen that at the bottom of the screenshot, a small notepad is kept wherein amount against 3389 is written as Rs. 15,000? Kindly explain the same?
Ans. Sir, I do not exactly remember what is mentioned in the notepad at the bottom of the screenshot having 15,000 against 3389.
Q.72 It is seen that at the bottom of the screenshot, a small notepad is kept wherein amount against 3391 is written as Rs. 10,500? Kindly explain the same?
Ans. Sir, I do not exactly remember what is mentioned in the notepad at the bottom of the screenshot having 10,500 against 3391.
Q.73 I am showing you a screenshot dated 29th August 2019 from your iphone from WeChat named Big Boss in your iphone. Kindly confirm the same.
xxxx
Q.74 In the WeChat mentioned in Q. No. 73 of this statement, kindly explain the content of screenshot?
Ans. This screenshot is the status of cash received / paid for a period of 30-45 days in M/s. Patel Mobiles written in the paper on 20.05.2019. Amounts and name mentioned on the left hand side in the screenshot is the cash received and amounts mentioned on the right hand side are the cash paid.
Q.75 From the content of the screenshot, it is seen that cash received from 922 is mentioned as Rs. 1300. Kindly explain the same.
Ans. Sir 922 mentioned in the screenshot is the shop number 922 in City Centre Mall who used to buy material in cash from M/s. Patel Mobile and M/s. Gopal Telecom and 1300-00 mentioned is the amount Rs. 9.
Q.76 It is seen that at the bottom of the screenshot, a small notepad is kept wherein amount against 922 is written as Rs. 130000? Kindly explain the same?
Ans. Sir, all the receipts from the cash sales are handled by Mr. Shravan Choudhary. So, Mr. Shravan Choudhary will be the right person to explain the difference in amounts.”
69. We have examined the above statement of Shri Suraj Patel. He has explained in the statement that the figures appearing in the screenshots represented the actual amounts recorded therein. At no stage did he state that such figures were recorded in coded form, represented 1/100th of the actual amounts, or were required to be multiplied by 100. We observed that his replies are clear and unambiguous in this regard.
70. The controversy before us is therefore confined to whether the Assessing Officer was justified in multiplying all the figures appearing in the main dairy screenshot by 100 merely by comparing a few entries with those appearing in the small notepad visible the bottom of the screenshot. Such an inference finds no support in the statement of Shri Suraj Kumar Patel. On the contrary, when specifically confronted with the differences between the figures appearing in the main screenshot and those in the small notepad, he either expressed his inability to explain the differences or stated that Shri Shravan Choudhary would be appropriate person to explain them. Thus, there was no admission by Shri Suraj Patel that the figures in the main diary were recorded in 1/100th denomination or were liable to be multiplied by 100.
71. We are also referring to screen shot found in the mobile phone of Shri Suraj Patel which is as under (scanned copy);
72. Further, the said screenshot was confronted to the assessee during the recording of his statement and in response to Question No.70, the assessee stated as under:-
Sir, I do not remember anything about this. I will explain the same in due course.”
Thus, we observed that the assessee neither admitted the contents of the screenshot nor accepted the Assessing Officer’s interpretation thereof.
73. We further find that the small screenshot reproduced above contains a total arrived at by adding Rs.1,30,000/-, Rs.1,00,000/-, Rs.6,180/-, Rs.4,230/- and Rs.10,000/- aggregating to Rs.2,50,410/-. In contrast the total appearing in the larger screenshot is Rs.3,30,943.80. Thus, the two screenshots contain materially different figures and no not correspond with each other. They cannot therefore be compared or relied upon to draw any definite conclusion, particularly that the figures appearing in the larger screen shot were recorded in 1/100th denomination and required to be multiplied by 100.
74. We are also referring to second screen shot found in the mobile phone of Suraj Patel which is as under (scanned copy):
75. We find that the assessing officer relied upon two screenshots containing images of diary pages. One screenshot as small diary contained at bottom side contained only about five entries, which allegedly matched certain entries appearing in the larger diary image. On the basis of this limited matching, the assessing officer presumed that all the figures appearing in the larger diary were required to be multiplied by 100 and accordingly, treated the enhanced figure as the assesseee’s unaccounted sales. The Ld. CIT(A) substantially upheld the inference drawn by the Assessing Officer but restricted the addition to 8% of the alleged unaccounted turnover by applying an ad hoc estimated gross profit rate.
76. On examining the seized material reproduced in the assessment order, we find that the larger diary bears the date 24-08-2019, whereas the smaller diary bears the date 23-08-2019. Further, the smaller diary contains only five entries, while the larger diary contains several entries. Thus, the two sets of entries are inconsistent both in respect of their dates and contents. The smaller diary contains incomplete and limited particulars, whereas the larger diary contains comparatively detailed entries. In these circumstances merely because a few entries allegedly correspond with each other, it cannot be presumed that all the figures appearing in the larger diary are required to be multiplied by 100. No complete diary was found or seized during the course of search, nor has any such diary been referred to or reproduced in the assessment order showing full entry matching. Consequently, there was no evidentiary basis for concluding that all entries appearing in the larger screenshot matched the entries recorded in the small diary. In the absence of any corroborative material, the multiplication of the figures by 100 is based solely on conjectures, assumptions and presumption. It is well settled that an addition cannot be sustained merely on the basis of suspicion or presumption, however strong it may be. We therefore, hold that the enhancement of the figures by applying a multiplier with 100 is unsustainable.
77. However, since it emerges from the search proceedings that the diary contained certain workings relating to the assessee’s business, the figures actually recorded therein are to be treated as representing unaccounted sales aggregating to Rs.5,90,370/-, without applying the multiplier of 100. Accordingly, the Assessing Officer is directed to restrict the addition to the gross profit element calculated at the rate of 8% on the unaccounted turnover of Rs.5,90,370/-. Consequently, the Revenue’s ground is dismissed, while the assessee’s ground is partly allowed.
78. Now we take up the ground No.4 of Revenue’s appeal and Ground No.7 of Assessee’s appeal for assessment year 2021-22 relating to the addition of Rs.12,65,84,996/- made on account of the alleged closing balances of sundry debtors, based on the excel sheet found during the course of search proceedings.
79. Ld. DR referring to assessment order submitted that during the course of survey proceedings conducted on 17-03-2021 at the premises situated at ground floor, parking side, Rubberwala Fuego Tower, Grant Road, Mumbai, a data backup was taken from a laptop (HP Model) belonging to the assessee, Shri Shravan Kumar Choudhary. From the said laptop, an excel file titled “GrpSum-952.xls” was found, containing names of 247 parties with an aggregate closing balance of Rs.12,65,84,996/-. The said excel sheet was confronted to the assessee during survey proceedings (Q.No.69). While the assessee acknowledged that the file was retrieved from the laptop, he denied the knowledge of the contents or ownership of the said data.
80. The Ld. DR further referring to page 13, para 6.1 of the assessment order, submitted that the assessee’s mobile phone was also examined during the proceedings and on examination, it was noticed that the names of several parties appearing as debtors in the excel sheet were matching with the contact names saved in the assessee’s mobile phone. When this fact was confronted to the assessed, he reiterated his earlier stand that the excel sheet did not belong to him and contended that someone operating in the common market might have used his laptop and saved the file therein.
81. The Ld. DR further relied upon the findings recorded in para 6.2.2 of the assessment order and submitted that the afore said explanation was duly considered by the Assessing Officer but was found to be untenable for the following reasons:
a) The impugned excel sheet was retrieved from the assessee’s own laptop
b) Although the expression “Samsung 2020” appeared in the sheet, the file was named “GrpSum-952.xls”. The reference to “952” indicated that the sheet pertained to Shop No.952 situated in the erstwhile City Centre Market.
d) During the post search proceedings, details of the owners of shops situated in City Centre Mall were obtained from M/s. Future Market Networks Ltd., the operator of the said mall.
e) 9 names appearing in the excel sheet matched the contact names saved in the assessee’s moble phone.
82. On the basis of the above circumstance, the Ld. DR submitted that the Assessing Officer had rightly concluded that the impugned excel sheet belonged to the assessee. Ld. DR further contended that mere appearance of the word “Samsung” in the sheet could not establish that the file was unrelated to the assessee’s business, particularly when the file was recovered from his laptop, referred to his Shop No.952 and contained names corresponding with the contacts saved in his mobile phone.
83. In reply, the Ld. Counsel for the assessee submitted that assessee’s statement recorded during the course of search has been reproduced at page 14 of the assessment order. In the said statement, the assessee categorically denied ownership of the impugned excel sheet and explained as under.
“Sir, I have already explained that the sheet does not belong to me. I further state that someone from the common market might have used my laptop to take a printout and may have inadvertently saved the file on my system. Since the persons concerned operate in the same market and we are also engaged in the business of mobile accessories, the names of some parties may be common.”
84. The Ld. Counsel for the assessee submitted that if the Revenue had obtained the details of the alleged debtors, it ought to have conducted an independent enquiry by issuing notices U/s 133(6) or summons U/s 131 of the Act to verify and identify the parties and the authenticity of the transactions. However, no such exercise was undertaken by the Assessing Officer. The impugned excel sheet allegedly contained the names of approximately 247 debtors, whereas the Assessing Officer claimed to have matched only 10 names with the contacts saved in the assessee’s mobile phone. The matching of a few common names could not lead to a presumption that all the debtors and transactions recorded in the sheet belonged to the assessee. The assessee carried on business in a large mobile accessories market in the Mumbai Central area, comprising thousands of small shops and traders. In such a common market, the names of certain parties could naturally appear in the contact lists of several traders. Further, the use of shared computers for taking printouts and transferring data was common.
85. The Ld. Counsel pointed out that the excel sheet did not contain the complete names, addresses, PAN or any other identifying particulars of the alleged debtors. It was thus incomplete and incapable of being independently verified. Consequently, the entire outstanding balance could not be attributed to the assessee merely on the basis of assumptions and presumptions. The file as stated to bear the name “Samsung-2020”, whereas no concern by that name was found to be associated with the assessee during the course of search. The assessee carried on business under the name “Patel Mobile”.
86. Ld. Counsel further pointed out that the Assessing Officer himself observed at para No. 6.2.2 at page No.14 that the word “Samsung” appearing in the file name did not represent the name of the assessee’s business. This circumstance, instead of supporting the Revenue’s case crated serious doubt regarding the ownership and authenticity of the document.
87. The Ld. Counsel further submitted that the document appeared to be an exported file generated from an accounting or Tally system. However, no corresponding Tally data, Books of account, sales records, purchase records, invoices, receipts or payment details relatable to the entries in the excel sheet were found or recovered from the assessee’s premises. The Assessing relied upon the file name “GrpSum-952.xls” to infer that the file belonged to the assessee merely because it contained the number “952” allegedly corresponding to the shop occupied by the assessee. However, the Assessing officer failed to cross verify even a single transaction recorded in the sheet with the alleged debtors or with the assessee’s regular books of account, bank statements, purchases or sales. The entire conclusion of the Assessing Officer was therefore based upon a chain of presumptions; first, that since the laptop belonged to the assessee every file stored therein must also belong to him; second, that since the file contained the number “952”, it must relate to Shop No.952, every transaction recorded in the file must necessarily belong to assessee. Such reasoning is found entirely upon suspicion, conjecture and surmise rather than legally admissible evidence.
88. The Ld. Counsel further submitted that is a settled proposition of law that suspicion, however strong, cannot take the place of proof. In the absence of independent corroborative evidence establishing the ownership, authenticity and correctness of the excel sheet, no addition could legally be sustained merely on the basis of an unverified electronic record. Accordingly, the Ld. Counsel prayed that the entire addition made by the Assessing Officer be deleted, instead of merely restricting it by applying a gross profit rate.
89. Ld. Counsel for the assessee further submitted that the alleged electronic record was not supported by the certificate mandated U/s 65B of the Indian Evidence Act, 1872. No such certificate was obtained or placed on record and the assessment order was completely silent regarding compliance with the statutory requirements governing the admissibility of electronic evidence. In the absence of the prescribed certification and supporting technical evidence the electronic record lacked authenticity and evidentiary reliability and could not by itself form the basis for making the impugned addition.
90. The Ld. Counsel finally submitted that the impugned excel sheet remained wholly uncorroborated and it is settled principle of law that an addition cannot be sustained merely on the basis of loose papers, dumb documents, rough notings or unauthenticated electronic records unless the Revenue establishes, through cogent and independent evidence a clear nexus between the document, the transactions recorded therein and the assessee. Suspicion, conjecture and presumption, however strong, could not substitute legal proof. Therefore the entire addition arising from the impugned excel sheet deserved to be deleted.
91. We have heard the rival contentions and perused the orders of the authorities, seized excel sheet and the material placed before us. The impugned excel sheet reflects an alleged closing balance of sundry debtors amounting to Rs.12,65,84,996/-. The names of the debtors appearing therein are incomplete, and the sheet bears the description “Samsung-2020”. The period covered by the file is stated to be from 1.10.2019 to 17.10.2020. However, the alleged list does not contain the complete names, addresses, PAN or any other identifying particulars of the debtors.
92. The Revenue’s case is principally founded upon the file name “GrpSum-952.xls”, the alleged correspondence of the number “952” with the shop occupied by the assessee and the matching of the names of 10 debtors out of 247 with the contacts saved in the assessee’s mobile phone. However, neither the Investigating Officer nor the Assessing Officer appear to have conducted any independent enquiry into the contents of the file. Merely matching 10 names out of approximately 247 names of alleged debtors, with the contacts saved in the assessee’s mobile phone cannot justify the conclusion that the entire file and all the transactions recorded therein belonged to the assessee.
93. Not even a single alleged debtor was examined by the Assessing Officer by issuing notice u/s 133(6) or summons u/s 131 of the Act. The recovery of the excel sheet could at best provide a starting point for further investigation. However, the Assessing officer failed to carry out investigation to its logical and meaningful conclusion especially when the assessee had repeatedly denied the ownership and contents of the file. It was incumbent of the Assessing Officer to verify the alleged balances from the parties concerned and bring independent corroborative evidence on record to justify the addition.
94. We further find that the Assessing Officer proceeded primarily on the basis of assumptions: that the laptop belonged to the assessee; that every file stored therein must necessarily belong to the assessee; that the number “952” in the file name referred to the assessee’s shop; and consequently that the entire amount recorded in the file represented the assessee’s sundry debtors. Liability cannot be fastened upon an assessee merely on the basis of such assumptions and presumptions. This chain of reasoning rests on suspicion and conjecture rather than cogent and legally admissible evidence. It is a settled proposition of law that suspicion, however strong it may be cannot take the place of proof beyond reasonable doubt. In the absence of independent corroborative evidence establishing the ownership and authenticity of the excel sheet and the truth and correctness of the entries recorded therein, no addition can be sustained merely on the basis of an unverified electronic record.
95. We further find that no document, record, or corresponding entry relating to “Samsung-2020” was found during the course of search proceedings. No Tally data, ledger account, voucher, invoice, or any other accounting record being the name “Samsung-2020” appears to have been recovered. Likewise, no corresponding cash book, bank book, purchase register, sales register, stock register, creditor’s ledger or debtor’s ledger was found to substantiate the balances reflected in the impugned excel sheet.
96. It is also evident from pages 68 to 71 of the paper book that the Investigation Officer recovered Tally database maintained in the names of “Gopal Telecom” and “Patel Mobile”. However, neither of these databases has any connection with “Samsung-2020” or with the transactions and balances appearing in the impugned excel sheet. Thus, even the accounting data actually recovered during the proceedings does not corroborate the impugned electronic record. Had the excel sheet genuinely represented the assessee’s business transactions, some supporting evidence such as corresponding sales or purchases, stock details, banking transactions, receipts, invoices, or ledger account would ordinarily have been found. The complete absence of any such primary or corroborative evidence demonstrates that the impugned excel sheet is merely an isolated and incomplete electronic file which, by itself, is insufficient evidence to establish any undisclosed business transactions or income in the hands of the assessee. In our view the impugned excel sheet, therefore, remains wholly uncorroborated. An addition cannot be sustained merely on the basis of loose papers, dumb document, rough notings or unauthenticated electronic records unless the Revenue establishes through cogent and independent evidence a clear nexus between the document, the transactions recorded therein and the assessee.
97. In this regard, we respectfully place reliance upon the decision of the Hon’ble Supreme Court in the case of Common Cause (A Registered Society) Vs. Union of India reported in [2017] 77 taxman.com 245 (SC) wherein the Hon’ble Apex Court has held as under;
“22. In case of Sahara, in addition there is adjudication by the Income Tax Settlement Commission. The order has been placed on record. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard dist, 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 disk and pen drive etc. do not comply with the requirement of the Income Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have not been able to show and substantiate the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The 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.
23. It is apparent that the Commission has recorded a finding that transactions noted in the documents were not genuine and thus has not attached any evidentiary value to the pen drive, hard disk, computer loose papers, computer printouts.”
98. The Hon’ble Supreme Court has held in the case of CBI Vs. V.C. Shukla [1998 taxmann.com 2155] that even correct and authentic entries in books of account cannot fix a liability upon a person without independent evidence of their trustworthiness. We noticed that the Hon’ble Supreme Court has dealt with the entries made in a diary which was considered to be regular books of account and held that it cannot be relied upon.
99. The Hon’ble Bombay High Court in the case of PCIT Vs. Umesh Ishrani [2019] 108 Taxman.com 437, wherein the court upheld the order of the Tribunal in deleting an addition made solely on the basis of loose papers found during search proceedings. Facts of this case is that during the course of search and seizure operation certain loose papers in respect of purchase of shops from developer were found and seized. On the basis of these loose papers additions were made in the hands of individual partners and on protective basis in the hands of the firm. While deleting such addition in case of assessee, the Tribunal noted that such loose papers nowhere showed that any payments were made by such partners and further, no enquiry or verification was made with seller of shops or developer. Thus the Tribunal concluded that entries reflected in loose papers were not corroborated with any other evidence on record. The High Court held that the Tribunal is justified in deleting the impugned additions made by the Assessing Officer.
100. The Bengaluru Bench of Tribunal in the case of Mohammed Ibrahim Mohideen Vs. ACIT [2024] 168 Taxman.com 385, held that additions could not be made merely on the basis of notings on loose sheet papers which were in nature of “dumb documents” having no evidentiary value. The facts in this case are during search/survey proceedings various incriminating materials were found based on which the Assessing Officer observed from loose slips that the assessee had made payment of Rs.95 lakhs to one vendor against disclosure of Rs.15 lakhs and made addition u/s 69B of the Act. The Tribunal noted that that the loose slips were unsigned documents that did not contain any details or name of parties to whom payments were made. Also investigating team did not collect any details of parties involved therein, so as to make payments and receipts of cash or cheque corresponding to these transactions. On these facts the Tribunal came to the conclusion that loose slips are nothing but dumb documents based on which no addition could be made.
101. The coordinate Bench of Mumbai Tribunal in the case of EI Resorts & Clubs (P) Ltd., Vs. DCIT [2025] 180 Taxman.com 338, held as under:
“The mere discovery of excel sheet which are not even prepared by the directors of the assessee company and remain uncorroborated by any external evidence, cannot, by itself, form the sole basis for an addition. Particularly so when the authorship and authenticity of such documents are in dispute. The Investigation Wing, which carries out the search, may record statements or seized documents; however, the same are merely inputs for further enquiry. Once the material is transmitted to the Jurisdictional Assessing Officer, it becomes incumbent upon him to apply his own independent mind and conduct proper enquiry to determine whether such statements or seized documents can lawfully lead to any addition. Further Bench held that the Assessing Officer cannot act as a mere forwarding agent of the report or view expressed by the Investigation Wing and mechanically incorporate the same in his assessment order without exercising his own judgment as to whether such information or view can legitimately form the foundation of an addition within the four corners of law. At best, the information and material emanating from the Investigation Wing may serve as a trigger or starting point to issue a show-cause notice and seek an explanation from the assessee. But once the assessee has rebutted those materials including any recorded statement with cogent reasons, the Assesing Officer must judiciously evaluate such explanation and undertake at least a prima facie enquiry to test the correctness of the rebuttal and strengthen the evidentiary base of the material relied upon. Such a method of assessment, built on conjecture and devoid of corroboration, cannot withstand judicial scrutiny. An addition resting purely on suspicion and unsupported inference is antithetical to the settled principles of evidentiary assessment and the doctrine of fair adjudication.”
102. We therefore hold that the Assessing Officer by relying solely upon an unverified excel sheet, travelled beyond the permissible limits of evidentiary inference. As discussed hereinabove, the impugned excel sheet is incapable of any meaningful interpretation in the absence of supporting contextual evidence. The cumulative effect of the absence of corroboration, failure to examine the alleged debtors, and the inherent vagueness and incompleteness of the excel sheet compels us to conclude that there is no factual or legal basis for treating the closing balance of Rs.12,65,84,996/- reflected therein as the assesseee’s undisclosed sundry debtors, unexplained money, or unaccounted business transactions.
103. Accordingly, the addition of Rs.12,65,84,996/- made by the Assessing Officer under section 69A cannot be sustained. Consequently, the action of the Ld. CIT(A) in treating the said amount as alleged unaccounted turnover of the assessee and estimating gross profit at 8% on such alleged debtors is also unsustainable. Thus, reversing the findings of the Ld. CIT (A) on this issue, we direct the Assessing Officer to delete the above said addition made U/s 69A of the Act for the assessment year 2021-22. The relevant grounds raised by the Assessee are allowed and the grounds raised by the Revenue are dismissed.
104. Now we take up ground No.9 of Assessee’s appeal for assessment year 2021-22, relating to the addition of Rs.2,40,000/- on account of rent paid in cash. During the course of search proceedings, the assessee admitted that he had paid rent in cash to Shri Imran Rubberwala. The assessee explained that he had taken two godowns situated at Rubberwala Fuego Tower on rent from October 2020, relevant to the Assessment year 2021-22, at a monthly rent of Rs.40,000/-. Although no formal rent agreement was executed, the rent was paid on the basis of a mutual oral understanding between the parties. The entire rental expenditure was duly recorded in the audited books of account for the year ended 31st March 2021.
105. The Ld. DR relied on the findings of the Assessing officer in the assessment order in bringing to tax the amount paid in cash as unexplained expenditure.
106. We have considered the rival submissions and examined the material available on record. The Assessing Officer observed that the assessee had claimed a deduction of Rs.2,40,000/- towards rent expenses for AY 2021-22, calculated at Rs.40,000/- per month. The Assessee was required to show cause and explain as to why the said expenditure should not be disallowed. In response the assessee filed submissions. However, assessee failed to furnish any supporting documentary evidence such as rent receipts, relevant ledge account, confirmation from the landlord, or proof of payment. Although the assessee had claimed aggregate rent expenses of Rs.8,37,422/- in the return of income, no bifurcation or material substantiating the impugned amount of Rs. 2,40,000/- was produced.
107. In the absence of any cogent and verifiable evidence establishing that the expenditure was actually incurred and recorded in the books of account, we find no infirmity in the disallowance made by the Assessing Officer. Accordingly, the addition is sustained and the ground raised by the Assessee on this issue is dismissed.
108. The next and last ground for A.Y. 2021-22 in Assessee’s appeal relates to the addition of Rs.1,93,114/- made on account of alleged difference in stock. During the course of search and subsequent post search proceedings, the Assessing officer noticed that a difference of Rs.1,93,114/- between the physical stock found during search and the stock reflected in the trial balance furnished by the Assessee. Accordingly, a notice was issued calling upon the Assessee to reconcile the stock as per the books and physical stock found during the search. In response the assessee furnished reconciliation statement along with, inter alia, the trial balances of Gopal Telecom and Patel Mobile as on 17-03-2021 and their respective balance sheets and P & L accounts as on that date, in support of stock recorded in the books vis-à-vis the stock physically found.
109. We have heard the rival contentions and perused the material available on record. We find from the assessment order that the trial balance was furnished the assessee on 24.8.2021, considerably after the date of search. According to the Assessing Officer, sufficient time had elapsed for the assessee to update all the relevant entries in the trial balance. Upon comparison, the assessing officer noticed the difference between the stock reflected in the trial balance/balance sheet and the stock valued during the course of search. The Assessing Officer treated the difference as unaccounted stock and made an addition U/s 69 of the Act as unexplained investment for AY 2021-22. The Assessee however contended that the stock difference had been duly accounted for in the books of account.
110. Having considered the rival submissions, we find that the assessee has not furnished any satisfactory reconciliation or supporting evidence to explain the difference in stock. Therefore, the addition cannot be deleted merely on the basis of an unsupported assertion that the difference has been duly accounted for. We thus sustained the orders of the authorities below and accordingly dismissed the ground raised by the Assessee on this issue.
111. In the result the Revenue appeals for the assessment years 2019-20, 2020-21 and 2021-22 are dismissed and the appeals of the Assessee for assessment years 2020-21 and 2021-22 are partly allowed as indicated above.
