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TMI Blog2025 (1) TMI 1539X X X X Extracts X X X X X X X X Extracts X X X X ..... ucha sub-group and also digital evidences found from his iPhone, were corroborated with order for transfer and posting passed by the Gout. of Maharashtra, PWD Department?" "ii. Whether on the facts of the case and in law, the Ld. CIT(A) erred in holding that the addition cannot be made by placing reliance on a statement of third party and on material found from the third party in the hands of the assessee in absence of any evidence linking such material to the assessee even though it is clearly seen from the search proceedings that the evidences found from iPhone of Shri Shailendra Rathi and he had explained the contents of the said documents during the search proceedings and these documents were further corroborated with order for transfer and posting passed by the Gout. of Maharashtra, PWD Department?" "iii. Whether on the facts of the case and in law, the Ld. CIT(A) has erred in relying on such cases in which the facts are different from the present case?" "iv. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 5,00,000/- made by the AO u/s 69A of the Act by ignoring the fact that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the desired posting. In response, the assessee denied having paid any amount in relation to any transfer and posting in the PWD Department to any person at any point in time. The assessee further submitted that the transfer and posting in the PWD Department was strictly done as per the rules and regulations of Maharashtra Government Servants Regulation of Transfers and Prevention of Delay in Discharge of Official Duties Act, 2005. The assessee further submitted that no private person was involved in the entire process of transfer and posting and accordingly, the question of paying any amount to anyone does not arise. Further, the assessee also denied having knowledge of any person's name in the notice and the group on which the search was conducted. The assessee further submitted that there is no information in the documents recovered during the search action to identify the assessee as a person referred to therein. It is thus submitted that no link has been established between the assessee and the group searched to support the allegation made against the assessee. 5. The Assessing Officer ("AO") vide order dated 25/01/2024 passed under section 143(3) r/w section 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), vide impugned order, partly allowed the appeal filed by the assessee and held that Shri Shailendra Rathi, who was alleged to be the employee of Rucha Group, is, in fact, a consultant to Rucha Group and not an employee. Further, the learned CIT(A) noted that the statement of Shri Shailendra Rathi was retracted post-search proceedings. The learned CIT(A) held that though the material was seized from the residential premises of Shri Avish Atal, however, the statement of Shri Avish Atal was not discussed by the AO in the assessment order. The learned CIT(A) held that the addition has been made by the AO relying on the statement of the third party and on the basis of material found during the course of the search on the third party and it is also a fact that those statements were retracted subsequently. By referring to various judicial pronouncements, as noted from pages 28-41 of the impugned order, wherein it has been held that documents/material found from the premises of a third party or the statement of a third party cannot be relied upon to make additions in the hands of the assessee, the learned CIT(A) held that in the present case, there is no independent evidence corrobo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: - Sr. No. Name Total Receivable Recd Till Date Balance Receivable Remark 15 ... ... ... ... ... 16 ... ... ... ... ... 17 Sharad Rajbhoh (SE) 125 125 Nil 8. Further, on the basis of the statement of Shri Ravi Wadepalle, an employee of Rucha Group, recorded under section 132(4) of the Act premises of Shri Avish Atal were searched and some incriminating documents pertaining to the transfer and posting of PWD Engineers were found and seized. The relevant extract of the documents seized from the residence of Shri Avish Atal, which has been relied upon by the AO, is reproduced as follows: - Sr. No. Name Designation Posting Decided Rec Balance Status Coordinator Category 8 ... ... ... ... ... ... ... ... ... 9 ... ... ... ... ... ... ... ... ... 10 S.N. RajbhoK SE Nashik 125 125 0.00 Done A 9. We find that during the search, the statement of Shri Ravi Wadepalle, an employee of Rucha Group, was recorded on oath under section 132(4) of the Act, the relevant portion of which relied upon by the AO is reproduced as follows: - "Q.10 I am showing you loose paper folder A2 which is seized from the residence of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is your role and responsibility in M/s Rucha Consultancy LLP? Ans. Sir, my duties in M/s. Rucha Consultancy LLP involves dealing with the PWD department of Maharashtra regarding liaisoning works. The major works assigned to me in this regard is to make deal between Our Clients (Contractor) and PWD -Department. On behalf of this service Rucha consultancy earned 0.5% to 1% commission on sanctioned amount from PWD Department. Also, I look into Transfer and Postings of Engineers in PWD Department. I also look into some land aggregation works which included site visits, collecting documents, search reports of the land deals that are to be finalised. Q.11 Please state to whom do you report in M/s Rucha Consultancy LLP and who gives you directions time to time regarding your work? Ans. Sir, most of the time I report to Sh.Prashant Prakash Nilawar, the partner of Rucha Consultancy LLP and sometimes to legal advisers, Pankaj Gawande. I receive directions time to time from Sh. Prashant Prakash Nilawar. Q.26. In response to Q.10, you have stated that you are also involved in the Transfer and Postings work. In this regard, please explain in detail the modusoperandi regarding Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected by two individuals, i.e. Sonu (Lalit) Mishra and Pawan Mishra. However, it is evident from the record that there is no further examination of these individuals by the Department to find further the fact that the amount of Rs. 1,25,00,000 was paid by the assessee to facilitate his transfer and posting. At this stage, it is also relevant to note that Shri Ravi Wadepalle categorically stated that the officers pay amounts in cash varying from Rs. 5 lakh to Rs.1 crore. However, in the present case, it is alleged that the assessee paid an amount of Rs. 1,25,00,000, which is in excess of the amount stated in the statement. We find that apart from the aforesaid statements and documents as noted above, there is no further examination by the Revenue to link the assessee to the material/statements found/recorded during the search proceedings. In order to support its contention, the AO has also placed reliance upon the transfer order dated 07/08/2020 passed by the Government of Maharashtra, transferring the assessee from District Satara to District Nashik. However, we are of the considered view that the transfer order cannot by itself be said to fall within the category of "independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss such material statement is corroborated by independent evidence linking such material to the assessee. Further, we find merits in the findings of the learned CIT(A) that such material could have been a reason for starting an investigation, however, the AO simply relied on material/statement found/recorded during the search proceedings without corroborating the same with any kind of independent evidence linking such material with the assessee. Thus, we are of the considered view that the AO did not make any attempt to confirm that such money was paid by the assessee and merely relied on the documents/statements found/recorded during the search to make the impugned additions. Further, the decisions relied upon by the learned Departmental Representative in the case of B.Kishore Kumar v/s CIT, reported in [2015] 62 taxmann.com 215(SC) and in the case of Madhav Gems (P) Ltd. v/s ITO, reported in [2021] 434 ITR 684 (Guj.) are distinguishable on facts as in the present case there was no search on the assessee and there was no independent inquiry by the AO on the information received from the search on third party. Thus, the aforesaid decisions are not applicable to the present case. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not take the place of proof. The Tribunal after appreciating all the pieces of evidence that were relied upon by the department in support of its case came to the conclusion that the evidence was not sufficient to prove even a single instance where the assessee could be said to have received money in "black" for which she did not pass a receipt. The other evidence was of a general character suggesting that the practice of receiving part remuneration in black was prevalent among cine stars which was of no avail to prove any specific instance against the assessee. The only specific evidence which required scrutiny was that furnished by the two entries and the statements of N. Vasudev Menon and C.S. Kumar. On a scrutiny of the two entries as well as the evidence of the two witnesses the Tribunal took the view that even that evidence did not carry the department's case any further and in that view of the matter the Tribunal deleted the additions made by the Income-tax Officer. The department has sought the reference to this court on three questions of law which are said to arise out of the Tribunal's order and out of the three questions which appear at page 6 of the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence and did not press the other evidence which was of a general character. However, having regard to the reasons which have been given by the Tribunal for disbelieving the two witnesses and for rejecting the entries that were found in the ledger of Vasu Films, we feel that the conclusion reached by the Tribunal purely rests on the appreciation of evidence and no questions of law arise. Mr. Joshi tried to urge before us that in paragraph 5 of its order the Tribunal has found fault with the entries appearing in the ledger on the ground that there were no corresponding entries in the day-book of the firm covering the same period and the Tribunal further observed that no attempt was made to explain the absence of relevant entries in the daybook and for that reason the Tribunal rejected the entries in the ledger on which reliance was placed. Mr. Joshi tried to urge that, after all, the entries in the ledger were the entries in a book which was not meant for being disclosed to the income-tax authorities because it contained the entries pertaining to the payment in "black" and the day-book for the relevant period that was available was a day-book meant for being produced before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the assessee and Shri Shailendra Rathi found from the mobile of Shri Shailendra Rathi. However, the assessee denied any such transaction having taken place between him and Shri Shailendra Rathi. It is evident from the record that during the assessment proceedings, the assessee sought a complete set of statements of Shri Shailendra Rathi to examine the same and also sought the opportunity to cross-examine Shri Shailendra Rathi. However, the AO merely on the statement of Shri Shailendra Rathi that the assessee asked him to deliver Rs. 5 lakh to Nashik made the additions in the hands of the assessee under section 69A of the Act. In further appeal, the learned CIT(A) deleted the addition, inter-alia, on the basis that in his statement Shri Shailendra Rathi stated that the transaction of delivering Rs.5 lakh could not take place and in any case, the entire statement was subsequently retracted by Shri Shailendra Rathi. The learned CIT(A) further noted that the WhatsApp chat had only an image of a Rs.5 note. Thus, on the basis that the said image was not corroborated with any independent evidence, the learned CIT(A) deleted the addition by placing reliance upon various judicial p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopers. No document containing signature of the assessee or handwriting of the assessee to corroborate the above making of payment by the assessee was found during the course of the search. Merely recording made by a third party or statement of a third party could not be treated as so sacrosanct so as to read as a positive material against the assessee. Therefore, addition in the hands of the assessee on account of 'onmoney' was held to be not justified. 7.3.3 In the case of Asstt. CIT v. Prabhat Oil Mills [1995) 52 TTJ 533 (Ahd. - Trib.), the department relied upon certain notings in the seized diary found from the premises of third party and contended that the assessee had made sales outside the books of accounts. However, the assessee denied of having made any sales outside the books of accounts. The Hon'ble Ahmedabad Tribunal held that once the assessee denies the transaction, the onus was on the Assessing Officer to prove with corroborative evidence that the entries in the seized diary represented sales outside books of accounts. The Hon'ble Tribunal further held that mere entries in the accounts of third party was not sufficient to prove that assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned material. It is seen that while such material could have been a reason for starting an investigation, the AO has simply relied on such material found from the premises of a third party and relied on third party statement to make the addition without corroborating it with any kind of independent evidence linking such material with the assessee. As per the plethora of Court judgments discussed above, such an act is not permitted under the law. The Hon'ble Supreme Court in the case of Umacharan Shaw and Bros v CIT (1959) 37 ITR 271 held 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 in the case of Pooja Bhatt 66 TTJ (Mum) 817 and in the case of D.M Kamani HUF 65 TTJ (Pat) 504. Thus, in the absence of any independent evidence linking the assessee with the material found from a third party or a third party statement, the addition made by the AO on the basis of such third party statement or material found from the third party cannot be sustained. The addition made by the AO of Rs. 5,00,000/- u/s 69A is deleted and the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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