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Judgment
PER ANUBHAV SHARMA, JM:
These appeals and cross objections are preferred by the assessee and revenue against the order dated 20.06.2025 of the Ld. Commissioner of Income Tax (Appeals)-30, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN & Order No.: ITBA/APL/M/250/2025-26/[1077271780(1)/1077272283(1)]arising out of the order dated 14.03.2022 u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the DCIT, CC-31, New Delhi for AYs: 2013-14 &2014-15.
Heard and perused the records. The facts in brief are that after survey operation conducted on 14.09.2017 in the case of JS Realcon Private Limited, Pivot Infratech Private Limited and Pivot Housing Private Limited at H. No. 193, Sector 11-B, Faridabad covered under Dalal group of search allegedly incriminating material was found and impounded and the same contained a ledger account in Imprest Suraj PD in the books of assessee for the financial year 2012-13 and 2013-14. Ld. Assessing Officer examined the same and concluded that cash payments have been made by assessee during financial year relevant to both the Assessment Years involved. Accordingly, the case was reopened u/s 147/148 of the Act and assessee was asked to explain the nature of transactions on the basis of these alleged incriminating material for which assessee submitted that the assessee has no connection whatsoever with the same. It was submitted that even the identity of Mr. Suraj in whose name the ledger exist is not established. It was however submitted that assessee company has purchased land in April, 2012 and May, 2012 and June, 2012. The sale deed were registered and the alleged payment of cash amounts are subsequent to the registration of land, therefore, it becomes questionable as to why cash payments would be made subsequent to the registration of thedas land. However, the assessing officer was not satisfied and observed para 7.1 & 7.2 (AY 2013-14) as follows:
“7.1.The assessee company denied any relationship of itself with the impounded ledger account. However, the impugned ledger account was impounded from the premises of M/s JS RealconPt Ltd, M.s Pivot InfratechPvt Ltd and M/s Pivot Housing Pvt Ltd during the survey operation and Shri Surender Singh was the director of all these companies during the year under consideration. Further, on perusal of sale deeds executed in financial year 2012-13 by the assessee company, it has been observed that the sale deeds were signed by Shri Surender Singh on behalf of the assessee company which clearly establishes that Shri Surender Singh was closely related to the assessee company. The same facts were confronted to the assessee firm vide this office letter dated 06.12.2021 issued while disposing off the objections raised by the assessee.
7.2.Further, the assessee company claimed that Mr. Suraj as mentioned on the ledger accounts have no relation with the assessee company. On perusal of page no. 2 and 3 of Annexure A-9 impounded during the survey operation, it has been observed that the ledger account of page no. 2 and 3 have narration "South Indian Bank - 557 ADPL, Che. No. 566199 salary to Suraji, which indicates that salary was paid to Suraj from M/s Ambit Digihomes Private Limited, South Indian Bank-557. On perusal of bank statement of account no. 0434073000000557 in South Indian Bank in the name of M/s Ambit Digihomes Private Limited, it was found that all the bank transactions made through bank as mentioned on the page no. 2 & 3 are exactly reflecting in this bank account of assessee. This fact proves the authenticity of impounded ledger accounts. Therefore, the claim of the assessee company that it has no relationship with any person namely 'Suraj' is misplaced and cannot be relied upon.”
Accordingly, the addition of Rs.6,55,00,000/- was made u/s 69 in AY: 2013-14 and Rs. 2,46,74,000/- was made in AY 2014-15. Assessee succeeded before ld. CIT(A) and thus department is in appeal and has raised following grounds (AY 2013-14);
“1.Whether on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 6,55,00,000/- - u/s 69C of the Income-tax Act, 1961 which was based on the ledger account seized from the premises of M/s J.S. Realcon Pvt Ltd, M.s Pivot Infratech Pvt Ltd and M/s Pivot Housing Pvt Ltd during the survey operation, considering that Shri Surender Singh was the director of all these companies during the year under consideration, and during the assessment proceedings and remand proceedings, a clear nexus was established and proved between Shri Surender Singh and the assessee company?
2.Whether the Ld. CIT(A) has erred in ignoring the fact that transactions dated 05-02-2013 shown to have taken place via banking channel in the Imprest Suraj PD' ledger account with the narration 'salary to Suraj ji' were shown to be matching with the bank statement of South Indian Bank account no. 0434073000000557 of the assessee? Further, whether the Ld. CIT(A) has erred in coming to the conclusion that aforementioned document is a "dumb document" just based on the fact that the ledger mentioned "salary to Suraj ji" and the bank statement showed that the amount was paid to Shri Surender Singh, without looking into the possibility that an alias could have been used to hide the real identity and without looking into the fact that the ledger account mentioned that for 18.04.2013 transactions vide cheque numbers 576838 and 566200 were carried out with Surender Singh with the narration "Salary for the Month of Feb" and "Salary for Month of March" and the same was matched through the bank statements thus showing that Surender Singh was closely working with the assessee company?
3.Whether the Ld. CIT(A) has erred in accepting the contention of the assessee that Shri Surender Singh and his firms had no relations with the assessee company when the ledger account found amongst the seized documents and the bank transactions of the assessee for the relevant year under consideration clearly show that regular transactions were taking place between the assessee company and Shri Surender Singh and he was also signing the sale deeds on behalf of the assessee company? Whether the Ld. CIT(A) should have used preponderance of possibility to come to the conclusion that Shri Surender Singh was being used by the assessee company to invest in properties and undertake transactions on their behalf and whether the relation established between Shri Surender Singh and the assessee should be kept in mind While dismissing the seized documents as 'dumb documents'?
4.Whether the Ld. CIT(A) has erred in accepting the narrative of the assessee that the transactions recorded as "salary paid to Suraj ji" in the ledger account was actually loan given to Shri Surender Singh and was repaid by him on 05.01.2015 considering that the transactions are structured in a manner and with a regularity that mimics a salary transaction more than a loan transaction and also considering the fact that the assessee has not provided a loan agreement or any document to show that these transactions were indeed a part of a loan? Also whether this justification by the assessee strikes at the heart of the claim of the assessee that Shri Surender Singh was just a prominent villager who was signing sale deeds on their behalf when in fact the assessee was having financial transactions with him?
5.Whether the Ld. CIT(A) has erred in not requiring the assessee to prove that the said transactions amounting to Rs. 6,55,00,000/- which have been carried out by the assessee were not undertaken by seeking a verification of the various lands and properties mentioned in the ledger account instead of agreeing with the claim of the assessee and accepting the bank statement over the ledger account found during the survey operations?
6.That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law.
7.The grounds of appeal are without prejudice to each other.
8.The appellant craves leave to add, amend, alter or forgo any grounds) of appeal either on or before the final hearing of the appeal.”
Ground No. 1 to 5: (AY: 2013-14)
The issue arises out of an addition of Rs.6,55,00,000/- u/s69C for alleged cash expenditure based on the impounded ledger" ImprestSuraj PD" seized from M/s J.S. Realcon Pvt. Ltd., M/s Pivot Infratech Pvt. Ltd., and M/s Pivot Housing Pvt. Ltd., alleging nexus with "Sh. Surender Singh", Director in the said companies. The ld. AO observed that the pages 1,2,2,22,77 and 79 of Annexure A-9 impounded from the premises contains ledger accounts in the name of "Imprest Suraj PD" in the books of Ambit Digihomes Pvt. Ltd. for the financial years 2013-14 and 2014-15 and perusal of pages 1,3 and 22 of Annexure A-9, show that the cash payments have been made by M/s Ambit Digi-homes Pvt. Ltd. during the financial year 2013-14 relevant to assessment year 2014-15.
The assessee company had denied any relationship of itself with the impounded ledger account. However, ld. AO concluded that the impugned ledger account was impounded from the premises of M/s JS Realcon Pvt. Ltd., M/s Pivot Infratech Pvt. Ltd. and M/s Pivot Housing Pvt. Ltd during the survey operation and Shri Surender Singh was the director of all these companies during the year under consideration. Further, on perusal of sale deeds executed in financial year 2012-13 by the assessee company, it has been observed that the sale deeds were signed by Shri Surender Singh on behalf of assessee company which clearly establishes that Shri Surender Singh was closely related to the assessee company. The ld. AO thus concluded as follows;
"It has been observed that the ledger account of page no. 2 and 3 have narration "South Indian Bank-557 ADPL, Che. No. 566199 salary to SurajJi", which indicates that salary was paid to Suraj from M/s Ambit Digihomes Private Limited, South Indian Bank-557. On perusal of bank statement of account no. 0434073000000557 in South Indian Bank in the name of M/s Ambit Digihomes Private Limited, it was found that all the bank transactions made through bank as mentioned on the page no. 2 & 3 are exactly reflecting in this bank account of assessee. This fact proves the authenticity of impounded ledger ac-counts.”
The Ld. CIT(A) has however concluded that there is the inherent unreliability of the seized ledgers themselves. These documents are un-signed, undated, and maintained in Tally software, a platform notorious for its susceptibility to manipulation due to the absence of an audit trail or user authentication protocols. The appellant has rightly emphasized that such records lack the hallmarks of authenticity required to serve as credible evidence. Ld. CIT(A) relied the decision of the Hon'ble Supreme Court's ruling in CIT vs. S Khader Khan Son (2013) by observing that same is squarely applicable here, wherein it was held that "dumb documents" those lacking signatures, dated, or independent corroboration carry no evidentiary value in tax proceedings. In the absence of supplementary evidence linking these ledgers to the appellant or verifying their con-tents, the AO's reliance on them is not merely misplaced but legally indefensible. Thus ld. CIT(A) concluded as follows;
“Appellant has convincingly demonstrated a complete disconnect between itself and the surveyed entities. There is no evidence whether documentary, testi-monial, or otherwise establishing that the directors, shareholders, employees, or any affiliates of the surveyed entities were part-ners, associates, or otherwise linked to the appellant LLP. This absence of a proven nexus undermines the foundational premise of the AO's case. Furthermore, the identity of "Suraj" remains wholly unestalished. Despite the appellant's persistent demand for clarification, the department has failed to provide even rudimentary details about Suraj his full identity, role, relationship to the appellant, or a statement corroborating the alleged payments. This glaring omission leaves the alleged recipient of the funds as a phantom figure, devoid of legal or factual significance in these proceedings. " (para 8.1 at page no. 75-76 of the CIT(A) order).
3.3The appellant's defence is further fortified by irrefutable bank evidence that directly contradicts the AO's narrative. The appellant submitted detailed bank statements from South Indian Bank A/c No. 0434073000000557, which unequivocally establish that Cheque No. 566199 cited in the seized ledger as evidence of a payment to Suraj was, in fact, issued to Mr. Surender Singh, an entirely distinct individual; with no apparent connection to Suraj. This cheque represented a temporary loan of Rs. 4.5 lakhs, which was fully repaid on 05.01.2015, a fact that predates the survey carried on 14.09.2017 and negates any suggestion of an outstanding or unexplained financial obligation." (para 8.3 at page no. 76 of CIT(A) order). Further, CIT(A) reproduced South Indian Bank A/c No. 0434073000000557 statement at page no. 77-79 of the CIT(A) order and held that "This evidence strikes at the heart of the AO's theory, exposing a fatal misidentification of the transaction's recipient and purpose. Astonishingly, the AO's remand report sidesteps this critical evidence entirely offering no explanation or rebuttal to reconcile this discrepancy." (para 8.3 at page no. 79 of CIT(A) order).”
Ld. DR has primarily relied the findings of ld. AO and the grounds, which are actually argumentative only.
Ld. Counsel of assessee however, relied the findings of ld. CIT(A).
After giving thoughtful consideration in the material on record and the rival contentions we find that ld. Assessing Officer had drawn conclusions with regard to unexplained expenditure taxable under the income u/s 69C of the Act on the basis of ledger account found during survey operations of 3 entities i.e. J.S. Realcon Pvt. Ltd.; Pivot Infrastructure Pvt. Ltd.; & Pivot Housing Pvt. Ltd. The content of this ledger account were not considered to be truthful on the basis of an entry of cheque by which salary was paid to one Suraj Ji from the bank account of assessee and this vital aspect has been found to be incorrect by ld. CIT(A) and even the assessing officer in the remand report could not justify these facts of the ledger account by any further evidence to show that the person referred to Mr. Suraj Ji was same as Surender Singh.
It appears that whole case of the assessing officer was on the basis of presumption drawn out of some entries in the ledger account wherein reference was made of name Suraj Ji which assessing officer has presumed to be none other than Surender Singh and Surender Singh has signed sale deed on behalf of the assessee and Surender Singh was director of the aforesaid referred three companies which are subject to survey. Assessee had responded to this assertion also by submitting that Surender Singh has no concern with the assessee company but was merely a representative of the company to get the sale deed executed on behalf of the company. However, there was no other evidence to show that Surender Singh had any stake whatsoever in the assessee company.
9 We are of the considered view that when assessing officer intended to draw inferences of cash payment with regard to an expenditure on the basis of a document of the nature of a ledger account that too found from some unrelated party, the inferences can be drawn only on the basis of some material corroborations of the transactions recorded in the ledger account. Moreso, when the provisions of Section 69C are to be invoked on account of alleged expenditure to question its sources then there should be a very crystallized finding as to what was the reason for expenditure in terms of the operations of the assessee company.
Now in case of assessee if alleged cash payments in the form of expenditure were on account of “on money” paid by the assessee for acquiring any land then this aspect should have been further corroborated by some evidences of such transactions. On the contrary, the assessee has come up with the specific case that land was purchased much prior to relevant entries of cash payments. Thus, rebutting the justification of reasons for cash payment as there was no corresponding business activity of acquiring asset for making an expenditure on the date of alleged cash payments to Suraj Ji.
We are of the considered view that ld. CIT(A)has taken a very reasonable view on the basis that when identity of this person Suraj Ji remains un-established and the corroboration evidence in the form of payment of salary to Suraj Ji by cheque is disproved by establishing that this cheque which issued to Surender Singh an entirely distinct individual then the alleged additions made u/s 69C of the Act deserved to be deleted and rightly done by the ld. CIT(A). The additions thus, made in the two assessment year before us by assessing officer were rightly deleted. The ground raised by the department have no substance. The corresponding cross objection raised by the assessee become infructuous. As a consequence the appeals of revenue are dismissed and the cross objection also stand dismissed being infructuous.