TMI Blog2021 (6) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has rightly deleted the addition - Decided against revenue. Addition u/s. 69A for on money payment - CIT- A deleted the addition - HELD THAT:- As rightly observed by the Ld. CIT(A), the AO relied on the loose sheet for assuming the payment of cash consideration over and above the registered amount as per the registered sale deed, however, there was no corroborative evidence or material found during the course of search. The said loose sheet did not give any details with regard to actual payment, the name of purchaser and the vendor. The assessee denied having made the payment over and above the registered sale deed. He explained the notings on loose sheet are rough notings but not the actual payments. No other corroborative evidence was found by the AO to assert that the payment was made over above the consideration recorded on sale deeds. The legal validity of notings on a loose sheet without having the corroborative evidence has come up before the coordinate bench of ITAT, Amritsar in the case of Smt. Harmohinder Kaur [ 2020 (1) TMI 1459 - ITAT AMRITSAR] as held that without the corroborative evidence, to prove the authenticity of diary seized during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o in the states of Andhra Pradesh and Telangana. Thus, the source of jewelry to the extent of minimum threshold as per Board Circular No. 1916 stands explained by the assessee. Therefore, we hold that the Ld. CIT(A) rightly deleted the addition placing reliance on Board circular and the decision of this Tribunal in the case of Suresh Kumar Jain [ 2019 (12) TMI 1186 - ITAT VISAKHAPATNAM] Addition on account of gold bars - Assessee explained during the course of search that gold bars were related to the company, kept in assessee's house. The AO made the addition for want of evidence in the form of entries in the books of accounts. Since the gold bars were purchased from the undisclosed income declared in the hands of the company, naturally no evidence would be available, since the same was acquired out of unexplained sources. Therefore expecting the evidence for the application of undisclosed income is unreasonable and ambitious. The assessee has requested for telescopic benefit from the additional income declared in the hands of the company in earlier assessment years and the same is justified. Therefore, we hold that the Ld. CIT(A) has rightly allowed the telescopic benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 231/2017 Dt.01.02.2017 6,42,000 Badam Venkata Demullu 3. 110 183.33 232/2017 Dt.01.02.2017 6,42,000 Badam Venkata Naga Satyaram 4. 111 183.33 233/2017 Dt.01.02.2017 6,42,000 BadamBhigalinga Swamy A search u/sec. 132 was conducted on 12/04/2017 and during search proceedings, in the business premises of M/s. Phozo Digital Press Pvt. Ltd., two loose sheets bundles were found and seized as Annexure A/PDPPL/VSKP/Office/01 02 which contain certain notings of on money payment in page No. 35 for purchase of the plots. In the loose sheet the sum of ₹ 25,65,000/- was mentioned through RTGS and the sum of ₹ 41,38,888/- was mentioned as cash payment for 4 plots, each admeasuring 183.33 sq.yds, thus the aggregate sum of ₹ 65,99,880/- was shown for four plots. The assessee has purchased one plot bearing plot No. 111 admeasuring 183.33 sq.yds registered as sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Megastructures Pvt. Ltd. in the names of the assessee and other family members. In the loose sheet there was a mention for payment of a sum of ₹ 25,68,000/- through RTGS @3,500/- per sq. yd and cash payment of ₹ 40,31,880/-@₹ 5,500/- and hence submitted that the actual sale consideration was ₹ 9,000/- per sq.yd. Therefore argued that as per the noting in loose sheet the assessee has paid the sum of ₹ 10,08,315/- to the vendor in cash over and above the registered sale consideration, hence the AO has rightly made the addition and the Ld. CIT(A) without appreciating the contents of incriminating material deleted the addition. The Ld. DR argued that the Ld. CIT(A) has erred in deleting the addition, therefore, requested to set aside the order of the Ld. CIT(A) and allow the appeal of the department. 5. Per contra, the Ld. AR relied on the orders of the Ld. CIT(A) and argued that the assessee has not made any payment over and above the sale consideration recorded in the sale deed for purchase of plots. What was found during the course of search in Page No. 35 of the said loose sheet was a rough noting but not the actual payment and it does not pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 6,04,800/- made u/s. 69A of the Act for on money payment which was deleted by the Ld. CIT(A).During the course of search on 12.04.2017 in the premises of the assessee Mr. Badam Bhogalinga Swamy certain loose sheets were found marked as Annexure A/BBS/Res/Vsp/01 and page No. 39 to 47 of the annexure are copies of the sale deeds for purchase of Plot No. 197 and 198 with extent of 48 sq yards each plot, aggregating to 96 sq. yds, in Sai Villa Phase III, Bhogapuram from Surya Developers for a consideration of ₹ 1,92,000/-. The incriminating material found in the premises of Phozo Digital Press Pvt. Ltd. in the form of loose sheets marked as Annexure A/PDPPL/Vskp/Office/01 on 12.04.2017 suggest the cash payments made by B.V. Demullu for purchase of the villa in Sai Villa Phase III, Bhogapuram from Surya Developers for an amount of ₹ 3,86,000/- dated 25/11/2016. The loose sheet in page No. 8 of the above annexure indicated the cash component of ₹ 21,04,000/- and cheque component of ₹ 6,72,000/- for plot No. 184, 185, 186 and 187 consisting of 4 plots aggregating to 336 sq.yds. at the rate of ₹ 8,300/- per sq. yrd. Therefore the AO viewed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The coordinate bench of ITAT has considered the decision of Hon'ble Supreme Court in the case of CBI Vs. V.C. Shukla 199 taxman.com 2155 and the decision of common cause (registered society) Vs. Union of India 77 taxman.com 245 and the decision of Hon'ble Delhi High Court in the case of CIT Vs. Praveen Jones ITA No. 57/2017 dt. 14.07.2017 and held that without the corroborative evidence, to prove the authenticity of diary seized during the course of search, the AO could not make addition in assessee's income on the basis of notings in the diary. For the sake of clarity and convenience, we extract para No. 13 of the order which reads as under: 12. The Apex Court in the cases of V.C. Shukla (supra) and Common Cause (A registered Society) (supra) analyzed the position of law with regard to the loose sheets/diary in which some noting has been made by the person other than the persons searched and clearly held that the said document do not have any value in the eyes of law. Further entries in the Diaries, note books and file containing loose sheets paper not in the form of Books of Accounts and has held that such entries in loose papers/sheets are not relevant and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO u/s. 69C of the Act. This is also common issue for all the appeals of Badam Venkata Demullu, Badam Venkateswarlu and Badam Bhogalinga Swamy for the AY. 2017-18. The AO found that the assessees have shown the meager amount of drawings of ₹ 1,20,000/- per annum. When the assessee was asked to justify the drawings, assesses have justified the drawings with the drawings of spouses which was around ₹ 2,40,000/- per year in each individual cases. However, the AO found from the scribbling pad that was seized during the course of search on 12.04.2017 from the residence of B. Venkateswarlu marked as Annexure A/BVS/02, wherein the hand written notings were made from 2014 to 2017 mentioning 63% from November 2014 to September 2015, 64% from October 2015 to February 2016 and 66% from March 2016 to January 2017. On the basis of hand written notings on the scribbling pad, the AO estimated undisclosed expenditure of ₹ 1,79,94,169/- (rounded off to ₹ 1,80,00,000/-), that might have been shared between the three families i.e. B. Venkateswarlu, B. Bhogalinga Swamy and B.V. Demullu from the profits and accordingly, proposed the addition u/sec. 69C and issued show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art thereof, or the explanation, if any, offered by him is not, in the opinion of the[Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: [Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.] As provided in section 69C, if the assessee had incurred the expenditure and failed to explain the source, the said expenditure required to be taxed u/s. 69C of the Act. In the instant case the AO made the estimated addition of unexplained expenditure without having any evidence to show that the assessee had incurred the expenditure. Though search u/s. 132 was conducted both in the company and the residences of directors, the department did not unearth any evidence having incurred such huge expenditure by the assessees. No other evidence was found by the AO evidencing the incurring of the expenditure to the tune of ₹ 1,80,00,000/- in the residence of three directors from the unac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's income on the basis of notings in the diary. 14.3. On similar issue in the case of Commissioner of Income-tax. v. C.J. Shah Co., [2001] 117 TAXMAN 577 (BOM.), Hon'ble Bombay High court held that having found no material to show turnover during block period, on the basis of loose sheets which indicated figures of only incoming and outgoing cash transactions, addition made was arbitrary. For the sake of clarity we, extract relevant paragraph of the order of Hon'ble Bombay High court which reads as under: 3. It is well-settled that in cases where material is detected after search and seizure operations are carried out, the Assessing Officer is required to determine the undisclosed income. In such cases additions are generally based on estimates. In matters of estimation some amount of latitude is required to be shown to the Assessing Officer, particularly when relevant documents are not forthcoming. However, it does not mean that the Assessing Officer can arrive at any figure without any basis by adopting an arbitrary method of calculation. In the present matter, A3, A4 and A6 nowhere records the turnover of the assessee as found by the Tribunal and yet on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support that this entry really represent cash of ₹ 60 lacs. There is no such evidence found by the revenue in the form of extra cash, jewellery or investment outside the books. In such a case, the explanation offered by the assessee cannot be rejected. In that view of the matter, I concur with the view taken by the learned Accountant Member. 14.5. Hon'ble ITAT, Pune Bench in the case of Chandra Mohan Mehta Vs. ACIT (1999) 71 ITD 245 held that loose papers were maintained and kept by the assessee for private knowledge and information, but not meant for disclosing to the department. If the statement of the assessee has to be rejected in toto, then no addition would be made on the basis of loose papers since those lease papers would be dumb papers. If the statement of the assessee was to be accepted in toto, then, the contents of the statements were to be accepted and borrowings mentioned in the loose papers has to be accepted as genuine. For the sake of clarity, we extract relevant part of the order of the Tribunal which reads as under: 9. In view of the above, it is held that the entire statement of the assessee has to be accepted. If that is so, no addition can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the residence belonged to the company and it was kept with him for safe custody. The assessee also explained that it was the practice of the company to keep the cash with the directors, since, keeping huge cash balances with a single person or in the premises of the company is risky. The assessee further requested for giving telescopic benefit of the cash found, against the undisclosed income declared in hands of the company. The AO found the explanation of the assessee with regard to request for telescopic benefit is unacceptable, since, the cash seized was consisting of new notes of ₹ 2,000/- and ₹ 500/- released after demonetization i.e. on 08.11.2016 and there were no withdrawals from his bank account to show that the cash found was from the disclosed sources. Therefore, the AO rejected the request for giving telescopic benefit and made the addition u/s. 69A r.w.s.115BBE of the Act. 18. Against the order of the AO, the assessee went on appeal before the CIT(A) and reiterated the arguments made before the AO. The Ld. CIT(A) observed that the assessee has admitted the additional income of ₹ 1,33,88,439/- for the earlier year i.e. 2017-18 in the hands of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) has rightly deleted the addition, and no interference is called for in the order of the Ld. CIT(A). 21. We have heard both the parties, perused the material placed on record. There is no dispute that the assessee has admitted the additional income of ₹ 1,33,88,439/- for the A.Y. 2017-18 and the assessee stated that the cash found during the course of search was belonged to the company M/s. Phozo Digital Pvt. Ltd. and it was the practice to keep cash with the directors of the company in their residences. Since, search u/s. 132 was conducted in the residence and the business premises and no evidence was found evidencing application of additional income admitted by the assessee, either in the hands of the company or in the hands of the directors, we do not find any reason to reject the telescopic benefit requested by the assessee. Hence, we find no reason to interfere with the order of the Ld. CIT(A) and the same is upheld. Appeal of the revenue on this ground is dismissed. 22. Ground No. 3 to 5 are related to the addition of unexplained jewellery u/s. 69C of the Act. During the course of search u/s. 132 in the residence of the assessee, gold jewellery weighing 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance addition of ₹ 29,10,000/-, the assessee requested for telescopic benefit from the additional income declared by the assessee in the hands of the company. The Ld. CIT(A) held that in the absence of any evidence to show that the undisclosed income declared by the assessee in the hands of the company was utilized for any other purpose, there is no justification for rejecting the assessee's claim for telescopic benefit, accordingly allowed the appeal of the assessee and deleted the addition. 24. Against which, the revenue has filed appeal before this Tribunal. During the appeal hearing, the Ld. DR argued that Circular No. 1916 is only for restricting the seizure of the gold and jewellery at the time of search and the same is not applicable for making the assessment. Though there is a circular issued by CBDT in Circular No. 1916, it is binding on the department to allow the credit of the jewellery to the extent of 500 gms. per married female and 250 gms. per unmarried female member and 100 gms. per male member of the family for seizure but not for the assessment, the AO is not barred from enquiring the sources of acquiring the jewellery. Since the assessee failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO made the addition for want of evidence in the form of entries in the books of accounts. Since the gold bars were purchased from the undisclosed income declared in the hands of the company, naturally no evidence would be available, since the same was acquired out of unexplained sources. Therefore expecting the evidence for the application of undisclosed income is unreasonable and ambitious. The assessee has requested for telescopic benefit from the additional income declared in the hands of the company in earlier assessment years and the same is justified. Therefore, we hold that the Ld. CIT(A) has rightly allowed the telescopic benefit and no interference is called for in the order of the Ld. CIT(A). Accordingly, we uphold the order of the Ld. CIT(A) and dismiss the appeal of the revenue. 27. Ground No. 6 is general in nature which does not require specific adjudication. 28. The assessee filed cross objections supporting the order of the Ld. CIT(A).Since the Revenue's appeal is dismissed the assessee's cross objections became infructuous, hence, dismissed. I.T.A. No. 10/VIZ/2021 (B. Venkata Demullu) 29. Ground No. 1 and 2 is related to the addition of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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