2025 (6) TMI 815 - AT - Income Tax

Addition u/s 69 - seizure and seizure operation has been conducted in the business premises of the assessee s Firm as per the loose sheets found there are several cash transactions involved and the same was confronted to the assessee and a sworn statement was recorded u/sec.132(4) - HELD THAT -Contention of the assessee that the Assessing Officer has made the impugned addition on the basis of a dumb document cannot be accepted we find that the assessee himself has admitted the entries made in the seized document in his sworn statement recorded u/sec.132(4) of the Act dated 07.02.2020 which co-relate to the payment made to M/s. Vandana Infra Developers Private Limited as advance for purchase of property. Therefore the document impounded cannot be treated as dumb document and therefore the contention of the Learned Counsel for the Assessee is rejected. Coming to the case laws Assessee relied on the decisions of Abhisar Buildwell P. Ltd. 2023 (4) TMI 1056 - SUPREME COURT in which the Hon ble Supreme Court held that when no incriminating material found or seized during the course of search no addition could be made. But in the instant case the incriminating material found and seized from the business premises of assessee s Firm was confronted to the assessee and in the sworn statement recorded on oath u/sec.132(4) the assessee admitted that he along with his wife have made the alleged payment of Rs. 50 lakhs in cash to M/s. Vandana Infra Developers Private Limited as advance for purchase of property and balance sum of Rs. 50 lakhs was paid by cheque out of funds from his Firm viz. M/s. Srinivasa Infrastructures. Further loose sheets found during the course of search and seizure is also supported by the agreement of sale of property entered into between the assessee and his wife with M/s. Vandana Infra Developers Private Limited for purchase of open plot of 83 sq. yards and 248 sq. yards situated at Mansoorabad Village Saroornagar Mandal. As per the sale agreement the assessee has paid Rs. 50 lakhs through cheque and an amount of Rs. 50 lakhs on 27.01.2020 by way of cash for purchase of property. Therefore the argument of the assessee that addition made by the Assessing Officer is not supported by any incriminating material found as a result of search and further the material relied upon by the Assessing Officer is a dumb document and cannot be treated as incriminating material is devoid of merit and thus rejected. Assessee claims that he has paid consideration for purchase of property out of funds drawn from partnership firm but in our considered view the learned CIT(A) has recorded a categorical finding that the appellant has drawn a sum of Rs. 18 lakhs and his wife Smt. Krishna Veni Kandala has drawn an amount of Rs. 10 lakhs from the partnership firm and further the respective drawings has been already accounted for as the amounts given to Sri KSR father-in-law of Sri D. Srinivasa Reddy of Rs. 15 lakhs and Rs. 10 lakhs to Smt. Kousalya mother-in-law of Sri D. Srinivasa Reddy . Therefore in our considered view the arguments of assessee that source for payment made for purchase of property is out of amounts withdrawn from the partnership firm is also not supported by any evidence and thus rejected. We find that since the entries in the document seized co-relate to the payment made by the assessee and in absence of sufficient documentary evidences furnished by the assessee that the impugned sum has been paid out of his known sources of income the addition made by the AO u/sec.69 of the Act and sustained by the CIT(A) are in accordance with law. We therefore inclined to uphold the order of the learned CIT(A). Accordingly the grounds raised by the assessee are dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in these appeals are:

(a) Whether the addition of Rs. 25 lakhs (being 50% share of Rs. 50 lakhs cash payment) made under section 69 of the Income Tax Act, 1961 ("the Act") on account of unexplained investment in property is sustainable in the absence of incriminating material found or seized during search and seizure operations.

(b) Whether the seized document marked as page no.149 of Annexure-A1 qualifies as a 'dumb document' and thus cannot form the basis for addition under the Act.

(c) Whether the Assessing Officer's satisfaction recorded under section 153C of the Act is valid and based on relevant material pertaining to the assessee.

(d) Whether the assessee has discharged the onus of proving the source of cash payment made for the property purchase out of known sources of income.

(e) Applicability and relevance of the Supreme Court decision in PCIT vs. Abhisar Buildwell P. Ltd. (2023) relied upon by the assessee, wherein it was held that no addition can be made in absence of incriminating material.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Sustainability of Addition under Section 69 of the Act

Legal Framework and Precedents: Section 69 of the Act empowers the Assessing Officer to make additions to income where any investment is found to be unexplained or not satisfactorily explained by the assessee. The burden lies on the assessee to prove the source of such investment from known income sources.

Court's Interpretation and Reasoning: The Tribunal noted that the addition of Rs. 25 lakhs was made based on the seized document and the statement recorded under section 132(4) of the Act, wherein the assessee admitted payment of Rs. 1 crore as advance for property purchase, with Rs. 50 lakhs paid in cash. Since the assessee failed to provide any satisfactory explanation or documentary evidence to prove that the cash payment was made from known sources, the addition under section 69 was upheld.

Key Evidence and Findings: The seized loose sheet (page no.149 of Annexure-A1) recording cash transactions, the sworn statement of the assessee admitting payment, and the sale agreement corroborating the transaction were critical pieces of evidence. The Assessing Officer's satisfaction note and the assessment order further supported the addition.

Application of Law to Facts: The Tribunal applied the principle that unexplained investments can be added to income under section 69 and found the assessee had not discharged the onus to prove the source of Rs. 25 lakhs cash payment. Consequently, the addition was justified.

Treatment of Competing Arguments: The assessee argued the payment was made from funds withdrawn from the partnership firm and hence not unexplained. However, the Tribunal found no documentary proof supporting this claim and noted that withdrawals had already been accounted for in other transactions. Therefore, this argument was rejected.

Conclusion: The addition under section 69 was rightly made and sustained as the assessee failed to establish the source of cash payment.

(b) Whether the Seized Document is a 'Dumb Document'

Legal Framework and Precedents: A 'dumb document' is one that does not implicate or incriminate the assessee and cannot be used as substantive evidence for making additions. The Supreme Court in PCIT vs. Abhisar Buildwell P. Ltd. held that additions cannot be based on such documents.

Court's Interpretation and Reasoning: The Tribunal rejected the contention that page no.149 of Annexure-A1 was a 'dumb document'. It observed that the assessee himself admitted the entries in the document during the sworn statement under section 132(4), which directly related to the cash payment made for property purchase. The document was thus incriminating and not 'dumb' as alleged.

Key Evidence and Findings: The document was seized from the business premises of the assessee's firm and was corroborated by the assessee's admission and the sale agreement for the property purchase.

Application of Law to Facts: Since the document was directly linked to the transaction admitted by the assessee, it could not be treated as a 'dumb document'. The Tribunal applied this principle to uphold the use of the document as valid incriminating material.

Treatment of Competing Arguments: The assessee's reliance on the 'dumb document' argument was dismissed due to the direct admission and corroboration by other documents.

Conclusion: The seized document was incriminating and valid for making additions under the Act.

(c) Validity of the Satisfaction Note Recorded under Section 153C

Legal Framework and Precedents: Section 153C allows assessment proceedings against a person other than the one searched if incriminating material relating to such person is found during search. The satisfaction note must be based on relevant material pertaining to the person.

Court's Interpretation and Reasoning: The Tribunal found the satisfaction note recorded by the Assessing Officer was specific and based on the seized loose sheet and the statement of the assessee. The material pertained to the assessee and the property transaction for the relevant assessment year.

Key Evidence and Findings: The seized document and the statement under section 132(4) formed the basis of the satisfaction. The Tribunal noted that the satisfaction was not vague or generalized but specific to the assessee's transactions.

Application of Law to Facts: The Tribunal held that the Assessing Officer's satisfaction was valid and justified initiation of proceedings under section 153C.

Treatment of Competing Arguments: The assessee's contention that the satisfaction was not based on material relating to him was rejected as the seized document and admission clearly linked to the assessee's transactions.

Conclusion: The satisfaction note under section 153C was valid and based on relevant incriminating material.

(d) Discharge of Onus by the Assessee to Prove Source of Cash Payment

Legal Framework and Precedents: The burden to prove that unexplained investment is from known sources lies on the assessee. Mere denial or vague claims without documentary evidence are insufficient.

Court's Interpretation and Reasoning: The Tribunal observed that the assessee failed to provide any documentary evidence to prove that the Rs. 25 lakhs cash payment was made from known sources. The claim that the funds were withdrawn from the partnership firm was not supported by evidence and was contradicted by accounting of withdrawals for other purposes.

Key Evidence and Findings: No valid documents or bank records were produced to substantiate the source of cash payment. The Assessing Officer and CIT(A) had recorded findings that the amounts withdrawn from the firm were already accounted for elsewhere.

Application of Law to Facts: The Tribunal applied the principle that failure to discharge the onus leads to addition under section 69 and upheld the addition accordingly.

Treatment of Competing Arguments: The assessee's claim of source from partnership firm withdrawals was rejected due to lack of evidence.

Conclusion: The assessee failed to discharge the onus, justifying the addition under section 69.

(e) Applicability of Supreme Court Decision in PCIT vs. Abhisar Buildwell P. Ltd.

Legal Framework and Precedents: The Supreme Court held that no addition can be made where no incriminating material is found or seized during search and seizure operations.

Court's Interpretation and Reasoning: The Tribunal distinguished the present facts from the Abhisar Buildwell case. In the present case, incriminating material in the form of seized documents and admissions were found, unlike in Abhisar Buildwell where no such material existed.

Key Evidence and Findings: The seized loose sheet and sworn statement admitting payment were considered incriminating material. The sale agreement further supported the transaction.

Application of Law to Facts: Since incriminating material was found and seized, the principle in Abhisar Buildwell was held to be inapplicable.

Treatment of Competing Arguments: The reliance on Abhisar Buildwell was rejected as the facts were materially different.

Conclusion: The Supreme Court precedent relied upon by the assessee was distinguished and not applicable.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

"The document impounded cannot be treated as 'dumb document' and, therefore, the contention of the Learned Counsel for the Assessee is rejected."

"The addition made by the Assessing Officer u/sec.69 of the Act and sustained by the learned CIT(A) are in accordance with law."

"The satisfaction recorded by the Assessing Officer under section 153C is specific and valid as it is based on incriminating material found and seized from the business premises of the assessee's firm."

"The facts of the present case are entirely different from the case considered by the Hon'ble Supreme Court in PCIT vs. Abhisar Buildwell P. Ltd., and therefore, the said case is not applicable."

"In absence of sufficient documentary evidences furnished by the assessee that the impugned sum has been paid out of his known sources of income, the addition made by the Assessing Officer is justified."

Ultimately, the Tribunal dismissed both appeals, upholding the addition of Rs. 25 lakhs under section 69 of the Act on the basis of incriminating seized documents, the assessee's admission, and failure to prove source of cash payment.