AI Insights
The case involves multiple appeals by the assessee, Chandra Prakash Jain, against the orders of the CIT(A) which confirmed the additions made by the AO under sections 69 and 153A of the Income Tax Act, 1961. The additions pertained to unexplained cash loans and interest income on advances given to farmers, which were allegedly found during a search operation. The tribunal examined the validity of the additions and the applicability of section 115BBE, ultimately deciding in favor of the assessee on several grounds due to lack of concrete evidence and the retrospective application of the law.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 793772 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
26-09-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
B
Assessment Year
2016-2017
Appeal Filed On
21-07-2025
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH “B”, JAIPUR BEFORE Dr. S. SEETHALAKSHMI, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER IT (SS) A Nos. 11 to 16/JPR/2025 (A.Ys. 2013-14 to 2018-19) Chandra Prakash Jain, B-100, Bhamashah Mandi, Kota. PAN No.: ABNPJ 0300L ..... Appellant Vs. ACIT/DCIT, Central Circle, Kota. ..... Respondent Appellant by : Mr. Vinod Gupta, Adv., Ld. AR Respondent by : Ms. Alka Gautam, CIT, Ld. DR Date of hearing : 11/09/2025 Date of pronouncement : 26/09/2025 O R D E R PER GAGAN GOYAL, A.M: These six appeals by assessee are directed against the order of Ld. CIT(A), Udaipur-2 dated 21.11.2024 & 22.11.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Ys. 2013-14 to 2018-19. The assessee has raised the following grounds of appeal:- In IT (SS) A No.11/JPR/2025 Printed from counselvise.com 2 1. The Ld. CIT (A) has erred in law as well as on the facts of the case in confirming the action of Ld. AO of initiating the assessment proceeding u/s. 153A of the Income Tax Act, 1961. The very action taken u/s. 153A of the act is bad in law and without jurisdiction. Hence, the same may kindly be quashed. 2. The Ld. CIT(A) erred in confirming the action of Ld. AO in making addition of Rs. 35,34,600/-on account of investment in cash loans u/s. 69 of the Act, the interest thereon and the interest income on account of advances to farmers. While the set off was provided, the entire addition should have been deleted. The addition so made, is unjustified, not considering the submissions in the right perspective and excessive, and kindly be deleted. 3. Without prejudice to the above, the Ld. CIT (A) has further erred in law and on facts in confirming the addition of Rs. 26, 88,050/- under section 69 of the Act, instead of treating the same as business income. Even if any addition is to be made, it should be assessed as business income and not as unexplained income under section 69. The addition under section 69A is unjustified, excessive, and not in accordance with the facts and submissions on record, and May kindly be deleted. 4. The Ld. CIT (A) has erred in law as well as on the facts of the case in confirming the action of the Ld. AO in calculating undisclosed interest earned on advances given to farmers of Rs. 4, 71,010/- by applying estimated rate of interest at 18 percent pa., without any basis as against interest of Rs. 3, 14,007/- computed by assessee by applying interest rate of 12 percent p.a.. The excess interest so calculated is unwarranted and may kindly be deleted. 5. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. In IT (SS) A No. 12/JPR/2025 1. The Ld. CIT (A) has erred in law as well as on the facts of the case in confirming the action of Ld. AO of initiating the assessment proceeding u/s. 153A of the Income Tax Act. The very action taken u/s. 153A of the act is bad in law and without jurisdiction. Hence, the same may kindly be quashed. Printed from counselvise.com 3 2. The Ld. CIT (A) erred in confirming the action of Ld. AO in making addition of Rs. 41,96,000/- on account of investment in cash loans u/s. 69 of the Act, the interest thereon and the interest income on account of advances to farmers. While the set off was provided, the entire addition should have been deleted. The addition so made, is unjustified, not considering the submissions in the right perspective and excessive, and kindly be deleted. 3. Without prejudice to the above, the Ld. CIT(A) has further erred in law and on facts in confirming the addition of Rs. 29,32,803/- under section 69 of the Act instead of treating the same as business income. Even if any addition is to be made, it should be assessed as business income and not as unexplained income under section 69. The addition under section 69 is unjustified, excessive, and not in accordance with the facts and submissions on record, and May kindly be deleted. 4. The Ld. CIT (A) erred in law as well as on the facts of the case confirming the action of Ld. AO in calculating undisclosed interest earned on advances given to farmers of Rs. 5, 90,090/-, by applying estimated rate of interest at 18 percent p.a., without any basis as against interest of Rs. 3, 93,394/- computed by assessee by applying interest rate of 12 percent p.a. The excess interest so calculated is unwarranted and may kindly be deleted. 5. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. In IT (SS) A No. 13/JPR/2025 1. The Ld. CIT (A) has erred in law as well as on the facts of the case in confirming the action of Ld. AO of initiating the assessment proceeding u/s. 153A of the Income Tax Act. The very action taken u/s. 153A of the act is bad in law and without jurisdiction. Hence, the same may kindly be quashed. 2. The Ld. CIT(A) erred in confirming the action of Ld. AO in making addition of Rs. 54,05,000/- on account of investment in cash loans u/s. 69 of the Act, the interest thereon and the interest income on account of advances to farmers. While the set off was provided, the entire addition should have been deleted. The Printed from counselvise.com 4 addition so made, is unjustified, not considering the submissions in the right perspective and excessive, and kindly be deleted. 3. Without prejudice to the above, the Ld. CIT(A) has further erred in law and on facts in confirming the addition of Rs. 30,84,849/- under section 69 of the Act instead of treating the same as business income. Even if any addition is to be made, it should be assessed as business income and not as unexplained income under section 69. The addition under section 69 is unjustified, excessive, and not in accordance with the facts and submissions on record, and May kindly be deleted. 4. The Ld. CIT (A) erred in law as well as on the facts of the case confirming the action of Ld. AO in calculating undisclosed interest earned on advances given to farmers of Rs. 10, 72,517/-, by applying estimated rate of interest at 18 percent p.a., without any basis as against interest of Rs. 7, 15,011/- computed by assessee by applying interest rate of 12 percent p.a. The excess interest so calculated is unwarranted and may kindly be deleted. 5. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. In IT (SS) A No. 14/JPR/2025 1. The Ld. CIT (A) has erred in law as well as on the facts of the case in confirming the action of Ld. AO of initiating the assessment proceeding u/s. 153A of the Income Tax Act. The very action taken u/s. 153A of the act is bad in law and without jurisdiction. Hence, the same may kindly be quashed. 2. The Ld. CIT(A) erred in confirming the action of Ld. AO in making addition of Rs. 63,20,000/- on account of investment in cash loans u/s. 69 of the Act, the interest thereon and the interest income on account of advances to farmers. While the set off was provided. The entire addition should have been deleted. The addition so made, is unjustified, not considering the submissions in the right perspective and excessive, and kindly be deleted. 3. Without prejudice to the above, the Ld. CIT(A) has further erred in law and on facts in confirming the addition of Rs. 35,11,999/- under section 69 of the Act instead of treating the same as business income. Even if any addition is to be Printed from counselvise.com 5 made, it should be assessed as business income and not as unexplained income under section 69. The addition under section 69 is unjustified, excessive, and not in accordance with the facts and submissions on record, and may kindly be deleted. 4. The Ld. CIT (A) erred in law as well as on the facts of the case confirming the action of Ld.AO in calculating undisclosed interest earned on advances given to farmers of Rs. 8, 24,174/-, by applying estimated rate of interest at 18 percent p.a., without any basis as against interest of Rs. 5, 49,450/- computed by assessee by applying interest rate of 12 percent pa. The excess interest so calculated is unwarranted and may kindly be deleted 5. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. In IT (SS) A No. 15/JPR/2025 1. The Ld. CIT (A) has erred in law as well as on the facts of the case in confirming the action of Ld. AO of initiating the assessment proceeding u/s. 153A of the Income Tax Act. The very action taken u/s. 153A of the act is bad in law and without jurisdiction. Hence, the same may kindly be quashed. 2. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 39,44,400/-on account of investment in cash loans u/s. 69 of the Act, the interest thereon and the interest income on account of advances to farmers. While the set off was provided, the entire addition should have been deleted. The addition so made is unwarranted, excessive and kindly be deleted in full. 3. The Ld. CIT(A) erred in law as well as on the facts of the case confirming the action of Ld. AO in calculating undisclosed interest earned on advances given to farmers of Rs.. 13,47,027/-, by applying estimated rate of interest at 18 percent p.a., without any basis as against interest of Rs. 8,98,018/ computed by assessee by applying interest rate of 12 percent p.a. 4. The Ld. CIT (A) has erred in law as well as on facts in confirming the action of the Ld. AO of invoking the provisions of section 115BBE of the Act. The said invocation is contrary to the law as well as facts and deserves to be quashed. Printed from counselvise.com 6 5. without prejudice, the Ld. CIT (A) has further erred in law as well as on the facts of the case in confirming the action of the Ld. AO of levying tax at the rate of 60% u/s 115BBE. The rate so levied is illegal and bad in law. 6. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. In IT (SS) A No. 16/JPR/2025 1. The Ld. CIT (A) has erred in law as well as on the facts of the case in confirming the action of Ld.AO of initiating the assessment proceeding u/s. 153A of the Income Tax Act. The very action taken u/s 153A of the act is bad in law and without jurisdiction. Hence, the same may kindly be quashed. 2. The Ld. CIT (A) has erred in law and on facts in confirming the addition of Rs. 50,000/- on account of investment in cash loans u/s. 69 of the Act, the interest thereon and the interest income on account of advances to farmers. While the set off was provided, the entire addition should have been deleted. The addition so made is unwarranted, excessive and kindly be deleted in full. 3. The Ld. CIT (A) has erred in law as well as on the facts of the case in confirming the action of the Ld AO in calculating undisclosed interest earned on advances given to farmers at Rs. 6, 72,723/- by applying estimated rate of interest at 18 percent p.a. without any basis as against interest of Rs. 4, 48,482/- computed by assessee by applying interest rate of 12 percent p.a. 4. That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing. In IT (SS) A No.11/JPR/2025 2. The brief facts of the case are that the assessee is engaged in trading of agricultural produce and also work as an Arat in the agriculture market. The Printed from counselvise.com 7 assessee filed his return of income under section 139 of the Act on 06.09.2013, declaring total income at Rs. 24, 65,310/- and agriculture income of Rs. 1, 43,080. A search action under section 132 of the Act was carried out on 18.04.2018 in the case of N.C. Moi Kalan Group, Kota and its associated concerns. Assessee was also searched under section 132 of the Act. Accordingly, notice under section 153A of the Act was issued and in response to this notice, assessee filed return under section 153A on 11.01.2019 declaring total income of 24, 65,310/- and agriculture income of Rs. 1, 43,080. During the search operation at the residential premises of the assessee, investigation wing found certain counter foils which was annexed as Exhibit-1 of Annexure-AS of Party-A2 which was claimed to contain details pertaining to ‘Hundis’. It was stated by the AO, in his assessment order, that the counter foils contain sum of Rs. 3, 11, 00,000/- which was given as cash loans by the assessee and addition for the same in respective years was made by the AO. The addition made for the current year is Rs. 35, 34,600/-. Further, although no addition, during the year, was made, by the AO, on account of interest earned on cash loan given by the assessee, however the Ld. CIT (A) extrapolated the interest income of Rs. 3, 75,540/- for the year also. Furthermore, the AO also made addition of interest income on advances to farmers on the premise of cash book of M/s. Nemi Chand Chandra Prakash (NCCP) found during search which was annexed as Exhbit-10 of Annexure AS of Party A-1. Rs. 4, 71,010/- was added for the current year in this regard. Further, as per the AO, the assessee, in his statement, admitted to have given cash loans to various persons and surrendered the amount but the same was retracted and not reported in the ITR furnished by the assessee post search. Printed from counselvise.com 8 During assessment proceedings, the assessee furnished the submissions before the AO. However, AO was not satisfied with the reply of the assessee and accordingly made the addition of undisclosed/unexplained cash loans under section 69 of the Act and also made the addition of unaccounted interest income on advances given to farmers. The assessee being aggrieved with this order preferred an appeal before the Ld. CIT (A), who in turn upheld the addition made by the AO and further also made addition for interest income on cash loan given by the assessee. The assessee, being further aggrieved with this order of the Ld. CIT (A), preferred the present appeal before us. 3. Before we proceed on the appeal filed by the assessee, it is brought to our knowledge that the appeal of the assessee is time barred by 171 days. On this issue, the assessee filed an application for condonation of delay alongwith his affidavit. It is brought to our notice that the assessee’s appeal before the Ld. CIT (A) was disposed of by an order dated: 21.11.2024 and the same was due for filing by 31.01.2025. But the same was filed before us on 21.07.2025, i.e. with a delay of 171 days. For the delay, the assessee submitted that the order was passed during November which is a period of enormous business activity for commission agent and traders of agricultural produce and the mother of the appellant was also critically ill due to which the assessee remained un- aware about the orders. Further, the CA of the assessee had also not communicated the order to the assessee and the new CA of the assessee informed him about the orders in the last week of June. We have carefully considered the facts of the case, affidavit and application for condonation Printed from counselvise.com 9 application filed by the assessee. In the result, taking lenient view, we deem it fit to condone the delay of 171 days in the interest of justice. 4. We have gone through the order of the AO and the order of the Ld. CIT (A) and submissions/arguments of both sides along with grounds taken by the assessee. Firstly, we take up Grounds of Appeals No. 1 raised with respect to non-quoting of DIN in the assessment order by the AO. The AR of the assessee draws our attention to circular19/2019 dated 14.08.2019 which mandates to quote DIN in every communication issued by the income tax department. The AR submitted that since the AO has not quoted the DIN in the body of the assessment order, the assessment order is invalid. On this ground, we take note of the fact that the Hon’ble Apex Court had stayed granted interim stay against the order of the Hon’ble High Court in the case of CIT Vs. Brandix Mauritius Holding Ltd. Therefore, considering the pendency of the issue before the Apex Court, we deem it appropriate to dispose the appeal with liberty to the assessee to revive this ground after the pronouncement of the Supreme Court judgment. 5. The DR relied on the orders of the AO and the Ld. CIT (A). 6. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). We have considered the judicial decisions relied upon by the assessee and the paper book filed by the assessee. We observe from the assessment order and order of the Ld. CIT (A) that a search action under section 132 was carried out in the case of the assessee on 18.04.2018. During the course of search, certain material inventoried as Exhibit-1 of Annexure-AS of Party-A2 was found and Printed from counselvise.com 10 seized. The AR of the assessee has also submitted the material vide his paper book for our perusal. For better understanding of this issue raised by the assessee, we are herein-below reproducing some images of the seized material Printed from counselvise.com 11 under consideration: Printed from counselvise.com 12 Printed from counselvise.com 13 7. The AO and the Ld. CIT (A) held that the contents of such page contain the entries of Hundis which is the cash loans given by the assessee. On the other hand, AR of the assessee highlighted before us the deficiencies in the seized pages and submitted that the seized pages neither indicate name of the appellant, drawer, drawee and payee nor having reference for any loan/cash or any year, hence they are deaf and dumb documents and cannot be held to be representing actual transactions. Further, the AR of the assessee also submitted although section 69 of the Act is not applicable in the current case since the assessee has not made any investment, however, without admitting, the jottings does not represent fresh loans rather they are sourced from the similar cash loans given earlier by the assessee, hence benefit of rotation should be given. 8. With regard to the statement, the AR of the assessee stated that the statement was obtained by coercive measures and assessee has retracted the statement, which is also acknowledged by the AO and the Ld. CIT (A), by not disclosing the same in his ITR and also invited our attention to CBDT Instruction: F. No. 286/2/2003-IT (Inv), dated 10th March, 2003 and judgments of various Hon’ble High Courts in reference to the forced confession. 9. On perusal of the orders of the AO and the Ld. CIT(A) and the submissions made by the appellant before the AO and the Ld. CIT(A) and before us. We note that the assessee had admitted in his statement that the material seized during search are ‘Hundi Receipt Book’ which contain details of cash loan taken and cash loan given by the assessee. Although, there is no corroborative Printed from counselvise.com 14 evidence showing name of recipient of loan, rate of interest, period etc., however in view of the admission during the search and appellant failure to discharge his onus u/s. 292C of explaining the paper seized from him, we are not in agreement with the contention of the assessee that the seized material is deaf and dumb document. 10. Since the document is not deaf and dumb, the only issue that is to be decided as to whether the whole amount so found to have been recorded in that seized material is to be considered as undisclosed income of the assessee or the year wise peak should be added in the total income of the assessee. We find that it is the prevalent practice in the trade of the assessee to give loan for the duration of 2-3 months and the same is also stated by the assessee in his statement which was not been objected by the AO or the Ld. CIT(A). Hence, to this effect, we find that if we are attributing evidentiary value to the statement under the current case, the statement has to be read as a whole without pick and choose theory and the submission of the assessee in his statement that cash loans are given for 2-3 months must also be given required weightage. 11. We also note that the addition of cash loan, made in the current case, is the sum of each entry appearing in the seized material. This fact is also admitted by the assessee in the statement that the addition of Rs. 3, 11, 00,000/- is the sum of all the entries appearing in the seized material. It is a fact that no other unaccounted income was found during the search. Moreover, the contention of the assessee that cash loans if given is out of repayment received of earlier cash loans cannot be ignored and it would not be proper on the part of the revenue to tax the total of seized material treating the same as cash loans. Printed from counselvise.com 15 Further, it is also not in dispute that the seized material is not communicating complete details with respect to cash loans in a sense that they are not stating clearly with regard to the year to which they relate, name of receiver, period etc. and neither the AO nor the Ld. CIT (A) or the assessee has brought before us any conclusive working about the seized material. We rely on our observation made in our own following judgement: a) DCIT v. Manoj Kumar Gupta (ITA No. 621 & 622/JPR/2025 “…Since, assessee has not provided the name of any such person, considering the statement of the assessee during post search proceedings, a reasonable income is required to be assessed in the hands of the assessee with reference to the total of transactions noted in these diaries in as much as the total receipt as such cannot be held to be income, more particularly when no corresponding asset or investment or expenditure was found in search…” 12. It is also observed by us that for invoking section 69 of the Act, there has to be an unrecorded/ unaccounted investment and that there cannot be any unaccounted investment without there being any unaccounted income. Therefore, for making any unaccounted investment, the assessee must be in possession of some unaccounted income. This position further supports the case of the assessee that the cash loans given were sourced from the repayment receipt of earlier cash loans since there is neither any evidence on record nor any finding of the AO or the Ld. CIT (A) regarding the sourcing of cash loans from any identified source. 13. Thus, in the light of the above facts and situation, to meet the end of justice, we deem it to proper to give benefit of rotation and also hold that only peak/ incremental peak of cash loans transaction can be added, as income, in the Printed from counselvise.com 16 hands of the assessee. The basic idea of applying peak theory under the current case is that the real income of the assessee should be taxed. Accordingly, considering the duration of loans to be 3 months (no. of rotation of money in a year = 4), the year wise peak/ incremental has been worked out as under: Assessment Year Fresh Cash Loan Peak/Incremental Peal 2013-14 8,83,650 (34,35,600/4) 8,83,650 2014-15 10,49,000 (41,96,000/4) 1,65,350 (10,49,000 – 8,83,650) 2015-16 13,51,250 (54,05,000/4) 3,02,250 (13,51,250 – 10,49,000) 2016-17 15,80,000 (63,20,000/4) 2,28,750 (15,80,000 – 13,51,250) 2017-18 9,86,100 (39,44,400/4) - Total 15,80,000/- 14. As we held above, only real income should be brought to tax, considering the above table, the real income of the assessee for the current year, on account of cash loans given by the assessee, comes to Rs. 8,83,650/- and hence the same should be taxed in assessee’s hands in the current year. Hence, the ground raised by the assessee is partly allowed and addition made by the ld. CIT (A) is hereby restricted to Rs. 8, 83,650/- for cash loans given by the assessee. Printed from counselvise.com 17 15. Now coming to the issue of addition made for interest earned on Hundi loans given by the assessee. We find that the AO has not made any addition, during the year, for interest on cash loans given by the appellant. The AR of the assessee also drew our attention to the fact that no documents with respect to interest on cash loans, pertaining to the year was found during the search and the seized material which are relied on by the AO for making addition of interest for the A.Y. 2017-18 and 2018-19 are deaf and dumb in nature. However, we note that the ld. CIT (A) has added income of Rs. 3, 75,540/- for the year. In our view, there was no documentary evidence with the AO to estimate interest on cash loans and accordingly he rightly has not made any addition in this regard. Hence, we do not find any justification in the action of the Ld. CIT (A) in adding interest income for the year when no document related to addition was found. Without commenting on the authenticity of the seized material relied for making addition for the A.Y. 2017-18 and 2018-19, it is a settled legal principle that the addition can be made on the basis of evidence and the interest cannot be extrapolated for the current year if the interest coming from seized material is not at all related to the said year. We rely on the judgement of Hon’ble Punjab and Haryana High Court: a) V. M. Spinning Mills, reported in [2011] 16 taxmann.com 199 “The Ld. Tribunal in further appeal by the Revenue as well as by the Assessee rejected the contention of the assessee in respect of addition of sales through 17 sale bills amounting to Rs. 1,11,99,427/- and affirm the finding that such sales were made outside the books of accounts. However, it held that there is no justification to infer that the assessee would have undertaken sales outside the books of accounts during this rest of financial year also, therefore, the assessment of unrecorded sales were limited to Rs. 1,11,99,427/- representing 17 unrecorded sale bills alone. The Tribunal partly granted relief, when it made addition of Rs. 20 lacs on account of unexplained investment made towards the working capital as against Rs.71,07,100/- added by the Printed from counselvise.com 18 Assessing Officer and upheld by the Commissioner of Income Tax. The same view has upheld by the High Court.” b) Swati industries v. The DCIT (ITA No. 216/Chd/2024] “27. The assessee’s reliance on the judgment of Gurdip Cycle Industries in ITA No. 705/Chd/2025 of Chandigarh Bench of the ITAT is applicable to the facts and circumstances of the case, wherein, the extrapolation was made on the basis of evidence of few days and it was held that such extrapolation could not be made. As such, we are in agreement with the findings on the basis of above said jurisdictional High Court and Coordinate Bench of the ITAT, Chandigarh Bench and hold that the extrapolation could not be made for 12 months. It is to be restricted to the evidence found during the course of search / survey i.e. upto 08.10.2018...” Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. Hence, in our considered view, the action of the Ld. CIT (A) is not correct. With these observations, appeal of assessee is allowed and addition is hereby deleted. 16. Now we proceed to address Ground No. 4 raised against the addition of Rs. 4, 71,010/- made on account of interest income on advances given to farmers. The AO made the addition on the basis of seized material marked as Exhbit-10 of Annexure AS of Party-A1. It is the contention of the AO that the said material contains details of advances given to farmers. During the search, the assessee surrendered Rs. 35, 00,000/- pertaining to A.Y. 2012-13 to 2018-19 against such interest but retracted the same subsequently. The ld. CIT (A) also confirmed the addition made by the AO. 17. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). The AR of the assessee submit that the assessee had not charged interest on the Printed from counselvise.com 19 advances given to farmers as it is a normal business practice in his trade to give advances to farmers, without interest, in order to attract them to sell the produce to the assessee. However, the AR of the assessee also stated that the seized material found was not related to the year under consideration rather pertaining to the period 01.04.2018 to 17.04.2018 and the advances appearing in those seized material is also recorded in the books of the assessee. On perusal of seized documents pertaining to interest income on advances given to farmers, it has been observed that the said seized material neither contain any rate of interest nor reference of any interest amount. The rate of 18% taken by the AO itself is not coming out from the seized material rather the AO has presumed such rate which is evident from his order. Hence, it is not in dispute that the interest has been computed by the AO on presumptive basis rather than on the basis of seized material or any documentary evidence. Therefore, we agree with the submission of the AR of the assessee that no addition can be made on the basis of presumptions and without bringing any corroborative material to substantiate that interest has been received by the assessee. Hence, since in the current case, receipt of interest is not coming out from the seized material rather computed on presumptive basis and the seized material itself is not related to the year under consideration and further since no corroborative evidence has been brought by the AO in this regard, we allow this ground of appeal of the assessee and delete the addition of Rs. 4, 71,010/- Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT(A), does not arise. 18. In the result, based on above the appeal of the assessee is partly allowed. Printed from counselvise.com 20 In IT (SS) A No. 12/JPR/2025 19. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). We have respectfully considered the judicial decisions relied upon by the assessee and the paper book filed by the assessee. Firstly, we take up Grounds of Appeals No. 2 raised with respect to addition made for cash loans given by the assessee. We observe from the assessment order and order of the Ld. CIT (A) that a search action under section 132 was carried out in the case of the assessee on 18.04.2018. During the course of search, certain material inventoried as Exhibit-1 of Annexure-AS of Party-A2 was found and seized. The AR of the assessee has also submitted the material vide his paper book for our perusal. For better understanding of this issue raised by the assessee, we are herein-below reproducing some images of the seized material under consideration: Printed from counselvise.com 21 Printed from counselvise.com 22 Printed from counselvise.com 23 20 The AO and the Ld. CIT (A) held that the contents of such page contain the entries of Hundis which is the cash loans given by the assessee. On the other hand, AR of the assessee highlighted before us the deficiencies in the seized pages and submitted that the seized pages neither indicate name of the appellant, drawer, drawee and payee nor having reference for any loan/cash or any year, hence they are deaf and dumb documents and cannot be held to be representing actual transactions. Further, the AR of the assessee also submitted although section 69 of the Act is not applicable in the current case since the assessee has not made any investment, however, without admitting, the jottings does not represent fresh loans rather they are sourced from the similar cash loans given earlier by the assessee, hence benefit of rotation should be given. 21 With regard to the statement, the AR of the assessee stated that the statement was obtained by coercive measures and assessee has retracted the statement, which is also acknowledged by the AO and the Ld. CIT (A), by not disclosing the same in his ITR and also invited our attention to CBDT Instruction: F. No. 286/2/2003-IT (Inv), dated 10th March, 2003 and judgments of various Hon’ble High Courts in reference to the forced confession. 22 On perusal of the orders of the AO and the Ld. CIT(A) and the submissions made by the appellant before the AO and the Ld. CIT(A) and before us. We note that the assessee had admitted in his statement that the material seized during search are ‘Hundi Receipt Book’ which contain details of cash loan taken and cash loan given by the assessee. Although, there is no corroborative evidence Printed from counselvise.com 24 showing name of recipient of loan, rate of interest, period etc., however in view of the admission during the search and appellant failure to discharge his onus u/s 292C of explaining the paper seized from him, we are not in agreement with the contention of the assessee that the seized material is deaf and dumb document. 23 Since the document is not deaf and dumb, the only issue that is to be decided as to whether the whole amount so found to have been recorded in that seized material is to be considered as undisclosed income of the assessee or the year wise peak should be added in the total income of the assessee. We find that it is the prevalent practice in the trade of the assessee to give loan for the duration of 2-3 months and the same is also stated by the assessee in his statement which was not been objected by the AO or the Ld. CIT(A). Hence, to this effect, we find that if we are attributing evidentiary value to the statement under the current case, the statement has to be read as a whole without pick and choose theory and the submission of the assessee in his statement that cash loans are given for 2-3 months must also be given required weightage. 24 We also note that the addition of cash loan, made in the current case, is the sum of each entry appearing in the seized material. This fact is also admitted by the assessee in the statement that the addition of Rs. 3, 11, 00,000/- is the sum of all the entries appearing in the seized material. It is a fact that no other unaccounted income was found during the search. Moreover, the contention of the assessee that cash loans if given is out of repayment received of earlier cash loans cannot be ignored and it would not be proper on the part of the Printed from counselvise.com 25 revenue to tax the total of seized material treating the same as cash loans. Further, it is also not in dispute that the seized material is not communicating complete details with respect to cash loans in a sense that they are not stating clearly with regard to the year to which they relate, name of receiver, period etc. and neither the AO nor the Ld. CIT (A) or the assessee has brought before us any conclusive working about the seized material. We rely on our observation made in our own following judgement: 25 DCIT v. Manoj Kumar Gupta (ITA No. 621 & 622/JPR/2025 “…Since, assessee has not provided the name of any such person, considering the statement of the assessee during post search proceedings, a reasonable income is required to be assessed in the hands of the assessee with reference to the total of transactions noted in these diaries in as much as the total receipt as such cannot be held to be income, more particularly when no corresponding asset or investment or expenditure was found in search…” 26 It is also observed by us that for invoking section 69 of the Act, there has to be an unrecorded/ unaccounted investment and that there cannot be any unaccounted investment without there being any unaccounted income. Therefore, for making any unaccounted investment, the assessee must be in possession of some unaccounted income. This position further supports the case of the assessee that the cash loans given were sourced from the repayment receipt of earlier cash loans since there is neither any evidence on record nor any finding of the AO or the Ld. CIT(A) regarding the sourcing of cash loans from any identified source. 27 Thus, in the light of the above facts and situation, to meet the end of justice, we deem it to proper to give benefit of rotation and also hold that only peak/ Printed from counselvise.com 26 incremental peak of cash loans transaction can be added, as income, in the hands of the assessee. The basic idea of applying peak theory under the current case is that the real income of the assessee should be taxed. Accordingly, considering the duration of loans to be 3 months (no. of rotation of money in a year = 4), the year wise peak/ incremental has been worked out as under: Assessment Year Fresh Cash Loan Peak/Incremental Peal 2013-14 8,83,650 (34,35,600/4) 8,83,650 2014-15 10,49,000 (41,96,000/4) 1,65,350 (10,49,000 – 8,83,650) 2015-16 13,51,250 (54,05,000/4) 3,02,250 (13,51,250 – 10,49,000) 2016-17 15,80,000 (63,20,000/4) 2,28,750 (15,80,000 – 13,51,250) 2017-18 9,86,100 (39,44,400/4) - Total 15,80,000/- 28 As we held above, only real income should be brought to tax, considering the above table, the real income of the assessee for the current year, on account of cash loans given by the assessee, comes to Rs. 1,65,350/- and hence the same should be taxed in assessee’s hands in the current year. Hence, the ground raised by the assessee is partly allowed and addition made by the ld. CIT (A) is hereby restricted to Rs. 1, 65,350/- for cash loans given by the assessee. Printed from counselvise.com 27 29 Now coming to the issue of addition made for interest earned on Hundi loans given by the assessee. We find that the AO has not made any addition, during the year, for interest on cash loans given by the appellant. The AR of the assessee also drew our attention to the fact that no documents with respect to interest on cash loans, pertaining to the year was found during the search and the seized material which are relied on by the AO for making addition of interest for the A.Y. 2017-18 and 2018-19 are deaf and dumb in nature. However, we note that the ld. CIT (A) has added income of Rs. 6, 73,107/- for the year. In our view, there was no documentary evidence with the AO to estimate interest on cash loans and accordingly he rightly has not made any addition in this regard. Hence, we do not find any justification in the action of the Ld. CIT (A) in adding interest income for the year when no document related to addition was found. Without commenting on the authenticity of the seized material relied for making addition for the A.Y. 2017-18 and 2018-19, it is a settled legal principle that the addition can be made on the basis of evidence and the interest cannot be extrapolated for the current year if the interest coming from seized material is not at all related to the said year. We rely on the judgement of Hon’ble Punjab and Haryana High Court: c) V. M. Spinning Mills, reported in [2011] 16 taxmann.com 199 “The Ld. Tribunal in further appeal by the Revenue as well as by the Assessee rejected the contention of the assessee in respect of addition of sales through 17 sale bills amounting to Rs. 1,11,99,427/- and affirm the finding that such sales were made outside the books of accounts. However, it held that there is no justification to infer that the assessee would have undertaken sales outside the books of accounts during this rest of financial year also, therefore, the assessment of unrecorded sales were limited to Rs. 1,11,99,427/- representing 17 unrecorded sale bills alone. The Tribunal partly granted relief, when it made addition of Rs. 20 lacs on account of unexplained Printed from counselvise.com 28 investment made towards the working capital as against Rs.71,07,100/- added by the Assessing Officer and upheld by the Commissioner of Income Tax. The same view has upheld by the High Court.” d) Swati industries v. The DCIT (ITA No. 216/Chd/2024] “27. The assessee’s reliance on the judgment of Gurdip Cycle Industries in ITA No. 705/Chd/2025 of Chandigarh Bench of the ITAT is applicable to the facts and circumstances of the case, wherein, the extrapolation was made on the basis of evidence of few days and it was held that such extrapolation could not be made. As such, we are in agreement with the findings on the basis of above said jurisdictional High Court and Coordinate Bench of the ITAT, Chandigarh Bench and hold that the extrapolation could not be made for 12 months. It is to be restricted to the evidence found during the course of search / survey i.e. upto 08.10.2018...” Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. Hence, in our considered view, the action of the Ld. CIT (A) is not correct. With these observations, appeal of assessee is allowed and addition is hereby deleted. 30 Now we proceed to address Ground No. 4 raised against the addition of Rs. 5, 90,090/- made on account of interest income on advances given to farmers. The AO made the addition on the basis of seized material marked as Exhbit-10 of Annexure AS of Party-A1. It is the contention of the AO that the said material contains details of advances given to farmers. During the search, the assessee surrendered Rs. 35, 00,000/- pertaining to A.Y. 2012-13 to 2018-19 against such interest but retracted the same subsequently. The ld. CIT (A) also confirmed the addition made by the AO. Printed from counselvise.com 29 31 We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). The AR of the assessee submit that the assessee had not charged interest on the advances given to farmers as it is a normal business practice in his trade to give advances to farmers, without interest, in order to lure them to sell the produce to the assessee. However, the AR of the assessee also stated that the seized material found was not related to the year under consideration rather pertaining to the period 01.04.2018 to 17.04.2018 and the advances appearing in those seized material is also recorded in the books of the assessee. On perusal of seized documents pertaining to interest income on advances given to farmers, it has been observed that the said seized material neither contain any rate of interest nor reference of any interest amount. The rate of 18% taken by the AO itself is not coming out from the seized material rather the AO has presumed such rate which is evident from his order. Hence, it is not in dispute that the interest has been computed by the AO on presumptive basis rather than on the basis of seized material or any documentary evidence. Therefore, we agree with the submission of the AR of the assessee that no addition can be made on the basis of presumptions and without bringing any corroborative material to substantiate that interest has been received by the assessee. Hence, since in the current case, receipt of interest is not coming out from the seized material rather computed on presumptive basis and the seized material itself is not related to the year under consideration and further since no corroborative evidence has been brought by the AO in this regard, we allow this ground of appeal of the assessee and delete the addition of Rs. 5, 90,090/-. Printed from counselvise.com 30 Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. 32 In the result, based on above the appeal of the assessee is partly allowed. In IT (SS) A No. 13/JPR/2025 33. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). We have respectfully considered the judicial decisions relied upon by the assessee and the paper book filed by the assessee. Firstly, we take up Grounds of Appeals No. 2 raised with respect to addition made for cash loans given by the assessee. We observe from the assessment order and order of the Ld. CIT (A) that a search action under section 132 was carried out in the case of the assessee on 18.04.2018. During the course of search, certain material inventoried as Exhibit-1 of Annexure-AS of Party-A2 was found and seized. The AR of the assessee has also submitted the material vide his paper book for our perusal. For better understanding of this issue raised by the assessee, we are herein-below reproducing some images of the seized material under Printed from counselvise.com 31 consideration: Printed from counselvise.com 32 Printed from counselvise.com 33 34. The AO and the Ld. CIT (A) held that the contents of such page contain the entries of Hundis which is the cash loans given by the assessee. On the other hand, AR of the assessee highlighted before us the deficiencies in the seized pages and submitted that the seized pages neither indicate name of the appellant, drawer, drawee and payee nor having reference for any loan/cash or any year, hence they are deaf and dumb documents and cannot be held to be representing actual transactions. Further, the AR of the assessee also submitted although section 69 of the Act is not applicable in the current case since the assessee has not made any investment, however, without admitting, the jottings does not represent fresh loans rather they are sourced from the similar cash loans given earlier by the assessee, hence benefit of rotation should be given. 35. With regard to the statement, the AR of the assessee stated that the statement was obtained by coercive measures and assessee has retracted the statement, which is also acknowledged by the AO and the Ld. CIT (A), by not disclosing the same in his ITR and also invited our attention to CBDT Instruction: F. No. 286/2/2003-IT (Inv), dated 10th March, 2003 and judgments of various Hon’ble High Courts in reference to the forced confession. 36. On perusal of the orders of the AO and the Ld. CIT(A) and the submissions made by the appellant before the AO and the Ld. CIT(A) and before us. We note that the assessee had admitted in his statement that the material seized during search are ‘Hundi Receipt Book’ which contain details of cash loan taken and cash loan given by the assessee. Although, there is no corroborative evidence showing name of recipient of loan, rate of interest, period etc., however in view Printed from counselvise.com 34 of the admission during the search and appellant failure to discharge his onus u/s. 292C of explaining the paper seized from him, we are not in agreement with the contention of the assessee that the seized material is deaf and dumb document. 37. Since the document is not deaf and dumb, the only issue that is to be decided as to whether the whole amount so found to have been recorded in that seized material is to be considered as undisclosed income of the assessee or the year wise peak should be added in the total income of the assessee. We find that it is the prevalent practice in the trade of the assessee to give loan for the duration of 2-3 months and the same is also stated by the assessee in his statement which was not been objected by the AO or the Ld. CIT(A). Hence, to this effect, we find that if we are attributing evidentiary value to the statement under the current case, the statement has to be read as a whole without pick and choose theory and the submission of the assessee in his statement that cash loans are given for 2-3 months must also be given required weightage. 38. We also note that the addition of cash loan, made in the current case, is the sum of each entry appearing in the seized material. This fact is also admitted by the assessee in the statement that the addition of Rs. 3, 11, 00,000/- is the sum of all the entries appearing in the seized material. It is a fact that no other unaccounted income was found during the search. Moreover, the contention of the assessee that cash loans if given is out of repayment received of earlier cash loans cannot be ignored and it would not be proper on the part of the revenue to tax the total of seized material treating the same as cash loans. Further, it is also not in dispute Printed from counselvise.com 35 that the seized material is not communicating complete details with respect to cash loans in a sense that they are not stating clearly with regard to the year to which they relate, name of receiver, period etc. and neither the AO nor the Ld. CIT (A) or the assessee has brought before us any conclusive working about the seized material. We rely on our observation made in our own following judgement: b) DCIT v. Manoj Kumar Gupta (ITA No. 621 & 622/JPR/2025 “…Since, assessee has not provided the name of any such person, considering the statement of the assessee during post search proceedings, a reasonable income is required to be assessed in the hands of the assessee with reference to the total of transactions noted in these diaries in as much as the total receipt as such cannot be held to be income, more particularly when no corresponding asset or investment or expenditure was found in search…” 39. It is also observed by us that for invoking section 69 of the Act, there has to be an unrecorded/ unaccounted investment and that there cannot be any unaccounted investment without there being any unaccounted income. Therefore, for making any unaccounted investment, the assessee must be in possession of some unaccounted income. This position further supports the case of the assessee that the cash loans given were sourced from the repayment receipt of earlier cash loans since there is neither any evidence on record nor any finding of the AO or the Ld. CIT(A) regarding the sourcing of cash loans from any identified source. 40. Thus, in the light of the above facts and situation, to meet the end of justice, we deem it to proper to give benefit of rotation and also hold that only peak/ incremental peak of cash loans transaction can be added, as income, in the hands of the assessee. The basic idea of applying peak theory under the current case is Printed from counselvise.com 36 that the real income of the assessee should be taxed. Accordingly, considering the duration of loans to be 3 months (no. of rotation of money in a year = 4), the year wise peak/ incremental has been worked out as under: Assessment Year Fresh Cash Loan Peak/Incremental Peal 2013-14 8,83,650 (34,35,600/4) 8,83,650 2014-15 10,49,000 (41,96,000/4) 1,65,350 (10,49,000 – 8,83,650) 2015-16 13,51,250 (54,05,000/4) 3,02,250 (13,51,250 – 10,49,000) 2016-17 15,80,000 (63,20,000/4) 2,28,750 (15,80,000 – 13,51,250) 2017-18 9,86,100 (39,44,400/4) - Total 15,80,000/- 41. As we held above, only real income should be brought to tax, considering the above table, the real income of the assessee for the current year, on account of cash loans given by the assessee, comes to Rs. 3,02,250/- and hence the same should be taxed in assessee’s hands in the current year. Hence, the ground raised by the assessee is partly allowed and addition made by the ld. CIT (A) is hereby restricted to Rs. 3, 02,250/-for cash loans given by the assessee. 42. Now coming to the issue of addition made for interest earned on Hundi loans given by the assessee. We find that the AO has not made any addition, during the Printed from counselvise.com 37 year, for interest on cash loans given by the appellant. The AR of the assessee also drew our attention to the fact that no documents with respect to interest on cash loans, pertaining to the year was found during the search and the seized material which are relied on by the AO for making addition of interest for the A.Y. 2017-18 and 2018-19 are deaf and dumb in nature. However, we note that the ld. CIT (A) has added income of Rs. 12, 47,634/- for the year. In our view, there was no documentary evidence with the AO to estimate interest on cash loans and accordingly he rightly has not made any addition in this regard. Hence, we do not find any justification in the action of the Ld. CIT (A) in adding interest income for the year when no document related to addition was found. Without commenting on the authenticity of the seized material relied for making addition for the A.Y. 2017-18 and 2018-19, it is a settled legal principle that the addition can be made on the basis of evidence and the interest cannot be extrapolated for the current year if the interest coming from seized material is not at all related to the said year. We rely on the judgement of Hon’ble Punjab and Haryana High Court: e) V. M. Spinning Mills, reported in [2011] 16 taxmann.com 199 “The Ld. Tribunal in further appeal by the Revenue as well as by the Assessee rejected the contention of the assessee in respect of addition of sales through 17 sale bills amounting to Rs. 1,11,99,427/- and affirm the finding that such sales were made outside the books of accounts. However, it held that there is no justification to infer that the assessee would have undertaken sales outside the books of accounts during this rest of financial year also, therefore, the assessment of unrecorded sales were limited to Rs. 1,11,99,427/- representing 17 unrecorded sale bills alone. The Tribunal partly granted relief, when it made addition of Rs. 20 lacs on account of unexplained investment made towards the working capital as against Rs.71,07,100/- added by the Assessing Officer and upheld by the Commissioner of Income Tax. The same view has upheld by the High Court.” f) Swati industries v. The DCIT (ITA No. 216/Chd/2024] Printed from counselvise.com 38 “27. The assessee’s reliance on the judgment of Gurdip Cycle Industries in ITA No. 705/Chd/2025 of Chandigarh Bench of the ITAT is applicable to the facts and circumstances of the case, wherein, the extrapolation was made on the basis of evidence of few days and it was held that such extrapolation could not be made. As such, we are in agreement with the findings on the basis of above said jurisdictional High Court and Coordinate Bench of the ITAT, Chandigarh Bench and hold that the extrapolation could not be made for 12 months. It is to be restricted to the evidence found during the course of search / survey i.e. upto 08.10.2018...” Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. Hence, in our considered view, the action of the Ld. CIT (A) is not correct. With these observations, appeal of assessee is allowed and addition is hereby deleted. 43. Now we proceed to address Ground No. 4 raised against the addition of Rs. 10, 72,517/- made on account of interest income on advances given to farmers. The AO made the addition on the basis of seized material marked as Exhbit-10 of Annexure AS of Party-A1. It is the contention of the AO that the said material contains details of advances given to farmers. During the search, the assessee surrendered Rs. 35, 00,000/- pertaining to A.Y. 2012-13 to 2018-19 against such interest but retracted the same subsequently. The ld. CIT (A) also confirmed the addition made by the AO. 44. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). The AR of the assessee submit that the assessee had not charged interest on the advances given to farmers as it is a normal business practice in his trade to give advances to farmers, without interest, in order to lure them to sell the produce to the Printed from counselvise.com 39 assessee. However, the AR of the assessee also stated that the seized material found was not related to the year under consideration rather pertaining to the period 01.04.2018 to 17.04.2018 and the advances appearing in those seized material is also recorded in the books of the assessee. On perusal of seized documents pertaining to interest income on advances given to farmers, it has been observed that the said seized material neither contain any rate of interest nor reference of any interest amount. The rate of 18% taken by the AO itself is not coming out from the seized material rather the AO has presumed such rate which is evident from his order. Hence, it is not in dispute that the interest has been computed by the AO on presumptive basis rather than on the basis of seized material or any documentary evidence. Therefore, we agree with the submission of the AR of the assessee that no addition can be made on the basis of presumptions and without bringing any corroborative material to substantiate that interest has been received by the assessee. Hence, since in the current case, receipt of interest is not coming out from the seized material rather computed on presumptive basis and the seized material itself is not related to the year under consideration and further since no corroborative evidence has been brought by the AO in this regard, we allow this ground of appeal of the assessee and delete the addition of Rs. 10, 72,517/-. Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. 45. In the result, based on above the appeal of the assessee is partly allowed. In IT (SS) A No. 14/JPR/2025 Printed from counselvise.com 40 46. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). We have respectfully considered the judicial decisions relied upon by the assessee and the paper book filed by the assessee. Firstly, we take up Grounds of Appeals No. 2 raised with respect to addition made for cash loans given by the assessee. We observe from the assessment order and order of the Ld. CIT (A) that a search action under section 132 was carried out in the case of the assessee on 18.04.2018. During the course of search, certain material inventoried as Exhibit-1 of Annexure-AS of Party-A2 was found and seized. The AR of the assessee has also submitted the material vide his paper book for our perusal. For better understanding of this issue raised by the assessee, we are herein-below reproducing some images of the seized material under Printed from counselvise.com 41 consideration: Printed from counselvise.com 42 Printed from counselvise.com 43 47. The AO and the Ld. CIT (A) held that the contents of such page contain the entries of Hundis which is the cash loans given by the assessee. On the other hand, AR of the assessee highlighted before us the deficiencies in the seized pages and submitted that the seized pages neither indicate name of the appellant, drawer, drawee and payee nor having reference for any loan/cash or any year, hence they are deaf and dumb documents and cannot be held to be representing actual transactions. Further, the AR of the assessee also submitted although section 69 of the Act is not applicable in the current case since the assessee has not made any investment, however, without admitting, the jottings does not represent fresh loans rather they are sourced from the similar cash loans given earlier by the assessee, hence benefit of rotation should be given. 48. With regard to the statement, the AR of the assessee stated that the statement was obtained by coercive measures and assessee has retracted the statement, which is also acknowledged by the AO and the Ld. CIT (A), by not disclosing the same in his ITR and also invited our attention to CBDT Instruction: F. No. 286/2/2003-IT (Inv), dated 10th March, 2003 and judgments of various Hon’ble High Courts in reference to the forced confession. 49. On perusal of the orders of the AO and the Ld. CIT(A) and the submissions made by the appellant before the AO and the Ld. CIT(A) and before us. We note that the assessee had admitted in his statement that the material seized during search are ‘Hundi Receipt Book’ which contain details of cash loan taken and cash loan given by the assessee. Although, there is no corroborative evidence showing name of recipient of loan, rate of interest, period etc., however in view of the admission Printed from counselvise.com 44 during the search and appellant failure to discharge his onus u/s 292C of explaining the paper seized from him, we are not in agreement with the contention of the assessee that the seized material is deaf and dumb document. 50. Since the document is not deaf and dumb, the only issue that is to be decided as to whether the whole amount so found to have been recorded in that seized material is to be considered as undisclosed income of the assessee or the year wise peak should be added in the total income of the assessee. We find that it is the prevalent practice in the trade of the assessee to give loan for the duration of 2-3 months and the same is also stated by the assessee in his statement which was not been objected by the AO or the Ld. CIT(A). Hence, to this effect, we find that if we are attributing evidentiary value to the statement under the current case, the statement has to be read as a whole without pick and choose theory and the submission of the assessee in his statement that cash loans are given for 2-3 months must also be given required weightage. 51. We also note that the addition of cash loan, made in the current case, is the sum of each entry appearing in the seized material. This fact is also admitted by the assessee in the statement that the addition of Rs. 3, 11, 00,000/- is the sum of all the entries appearing in the seized material. It is a fact that no other unaccounted income was found during the search. Moreover, the contention of the assessee that cash loans if given is out of repayment received of earlier cash loans cannot be ignored and it would not be proper on the part of the revenue to tax the total of seized material treating the same as cash loans. Further, it is also not in dispute that the seized material is not communicating complete details with respect to cash loans in a sense that they are not stating clearly with regard to the year to Printed from counselvise.com 45 which they relate, name of receiver, period etc. and neither the AO nor the Ld. CIT (A) or the assessee has brought before us any conclusive working about the seized material. We rely on our observation made in our own following judgement: c) DCIT v. Manoj Kumar Gupta (ITA No. 621 & 622/JPR/2025 “…Since, assessee has not provided the name of any such person, considering the statement of the assessee during post search proceedings, a reasonable income is required to be assessed in the hands of the assessee with reference to the total of transactions noted in these diaries in as much as the total receipt as such cannot be held to be income, more particularly when no corresponding asset or investment or expenditure was found in search…” 52. It is also observed by us that for invoking section 69 of the Act, there has to be an unrecorded/ unaccounted investment and that there cannot be any unaccounted investment without there being any unaccounted income. Therefore, for making any unaccounted investment, the assessee must be in possession of some unaccounted income. This position further supports the case of the assessee that the cash loans given were sourced from the repayment receipt of earlier cash loans since there is neither any evidence on record nor any finding of the AO or the Ld. CIT(A) regarding the sourcing of cash loans from any identified source. 53. Thus, in the light of the above facts and situation, to meet the end of justice, we deem it to proper to give benefit of rotation and also hold that only peak/ incremental peak of cash loans transaction can be added, as income, in the hands of the assessee. The basic idea of applying peak theory under the current case is that the real income of the assessee should be taxed. Accordingly, considering the duration of loans to be 3 months (no. of rotation of money in a year = 4), the year wise peak/ incremental has been worked out as under: Printed from counselvise.com 46 Assessment Year Fresh Cash Loan Peak/Incremental Peal 2013-14 8,83,650 (34,35,600/4) 8,83,650 2014-15 10,49,000 (41,96,000/4) 1,65,350 (10,49,000 – 8,83,650) 2015-16 13,51,250 (54,05,000/4) 3,02,250 (13,51,250 – 10,49,000) 2016-17 15,80,000 (63,20,000/4) 2,28,750 (15,80,000 – 13,51,250) 2017-18 9,86,100 (39,44,400/4) - Total 15,80,000/- 54. As we held above, only real income should be brought to tax, considering the above table, the real income of the assessee for the current year, on account of cash loans given by the assessee, comes to Rs. 2,28,750/- and hence the same should be taxed in assessee’s hands in the current year. Hence, the ground raised by the assessee is partly allowed and addition made by the ld. CIT (A) is hereby restricted to Rs. 2, 28,750/-for cash loans given by the assessee. 55. Now coming to the issue of addition made for interest earned on Hundi loans given by the assessee. We find that the AO has not made any addition, during the year, for interest on cash loans given by the appellant. The AR of the assessee also drew our attention to the fact that no documents with respect to interest on cash loans, pertaining to the year was found during the search and the seized material Printed from counselvise.com 47 which are relied on by the AO for making addition of interest for the A.Y. 2017-18 and 2018-19 are deaf and dumb in nature. However, we note that the ld. CIT (A) has added income of Rs. 19,83,827/- for the year. In our view, there was no documentary evidence with the AO to estimate interest on cash loans and accordingly he rightly has not made any addition in this regard. Hence, we do not find any justification in the action of the Ld. CIT (A) in adding interest income for the year when no document related to addition was found. Without commenting on the authenticity of the seized material relied for making addition for the A.Y. 2017-18 and 2018-19, it is a settled legal principle that the addition can be made on the basis of evidence and the interest cannot be extrapolated for the current year if the interest coming from seized material is not at all related to the said year. We rely on the judgement of Hon’ble Punjab and Haryana High Court: g) V. M. Spinning Mills, reported in [2011] 16 taxmann.com 199 “The Ld. Tribunal in further appeal by the Revenue as well as by the Assessee rejected the contention of the assessee in respect of addition of sales through 17 sale bills amounting to Rs. 1,11,99,427/- and affirm the finding that such sales were made outside the books of accounts. However, it held that there is no justification to infer that the assessee would have undertaken sales outside the books of accounts during this rest of financial year also, therefore, the assessment of unrecorded sales were limited to Rs. 1,11,99,427/- representing 17 unrecorded sale bills alone. The Tribunal partly granted relief, when it made addition of Rs. 20 lacs on account of unexplained investment made towards the working capital as against Rs.71,07,100/- added by the Assessing Officer and upheld by the Commissioner of Income Tax. The same view has upheld by the High Court.” h) Swati industries v. The DCIT (ITA No. 216/Chd/2024] “27. The assessee’s reliance on the judgment of Gurdip Cycle Industries in ITA No. 705/Chd/2025 of Chandigarh Bench of the ITAT is applicable to the facts and circumstances of the case, wherein, the extrapolation was made on the basis of Printed from counselvise.com 48 evidence of few days and it was held that such extrapolation could not be made. As such, we are in agreement with the findings on the basis of above said jurisdictional High Court and Coordinate Bench of the ITAT, Chandigarh Bench and hold that the extrapolation could not be made for 12 months. It is to be restricted to the evidence found during the course of search / survey i.e. upto 08.10.2018...” Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. Hence, in our considered view, the action of the Ld. CIT (A) is not correct. With these observations, appeal of assessee is allowed and addition is hereby deleted. 56. Now we proceed to address Ground No. 4 raised against the addition of Rs. 8, 24,174/- made on account of interest income on advances given to farmers. The AO made the addition on the basis of seized material marked as Exhbit-10 of Annexure AS of Party-A1. It is the contention of the AO that the said material contains details of advances given to farmers. During the search, the assessee surrendered Rs. 35, 00,000/- pertaining to A.Y. 2012-13 to 2018-19 against such interest but retracted the same subsequently. The ld. CIT (A) also confirmed the addition made by the AO. 57. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). The AR of the assessee submit that the assessee had not charged interest on the advances given to farmers as it is a normal business practice in his trade to give advances to farmers, without interest, in order to lure them to sell the produce to the assessee. However, the AR of the assessee also stated that the seized material found was not related to the year under consideration rather pertaining to the Printed from counselvise.com 49 period 01.04.2018 to 17.04.2018 and the advances appearing in those seized material is also recorded in the books of the assessee. On perusal of seized documents pertaining to interest income on advances given to farmers, it has been observed that the said seized material neither contain any rate of interest nor reference of any interest amount. The rate of 18% taken by the AO itself is not coming out from the seized material rather the AO has presumed such rate which is evident from his order. Hence, it is not in dispute that the interest has been computed by the AO on presumptive basis rather than on the basis of seized material or any documentary evidence. Therefore, we agree with the submission of the AR of the assessee that no addition can be made on the basis of presumptions and without bringing any corroborative material to substantiate that interest has been received by the assessee. Hence, since in the current case, receipt of interest is not coming out from the seized material rather computed on presumptive basis and the seized material itself is not related to the year under consideration and further since no corroborative evidence has been brought by the AO in this regard, we allow this ground of appeal of the assessee and delete the addition of Rs. 8, 24,174/-. Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. 58. The result, based on above the appeal of the assessee is partly allowed. In IT (SS) A No. 15/JPR/2025 59. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). We have respectfully considered the judicial decisions relied upon by the assessee and the Printed from counselvise.com 50 paper book filed by the assessee. Firstly, we take up Grounds of Appeals No. 2 raised with respect to addition made for cash loans given by the assessee. We observe from the assessment order and order of the Ld. CIT (A) that a search action under section 132 was carried out in the case of the assessee on 18.04.2018. During the course of search, certain material inventoried as Exhibit-1 of Annexure- AS of Party-A2 was found and seized. The AR of the assessee has also submitted the material vide his paper book for our perusal. For better understanding of this issue raised by the assessee, we are herein-below reproducing some images of the Printed from counselvise.com 51 seized material under consideration: Printed from counselvise.com 52 Printed from counselvise.com 53 60. The AO and the Ld. CIT (A) held that the contents of such page contain the entries of Hundis which is the cash loans given by the assessee. On the other hand, AR of the assessee highlighted before us the deficiencies in the seized pages and submitted that the seized pages neither indicate name of the appellant, drawer, drawee and payee nor having reference for any loan/cash or any year, hence they are deaf and dumb documents and cannot be held to be representing actual transactions. Further, the AR of the assessee also submitted although section 69 of the Act is not applicable in the current case since the assessee has not made any investment, however, without admitting, the jottings does not represent fresh loans rather they are sourced from the similar cash loans given earlier by the assessee, hence benefit of rotation should be given. 61. With regard to the statement, the AR of the assessee stated that the statement was obtained by coercive measures and assessee has retracted the statement, which is also acknowledged by the AO and the Ld. CIT (A), by not disclosing the same in his ITR and also invited our attention to CBDT Instruction: F. No. 286/2/2003-IT (Inv), dated 10th March, 2003 and judgments of various Hon’ble High Courts in reference to the forced confession. 62. On perusal of the orders of the AO and the Ld. CIT(A) and the submissions made by the appellant before the AO and the Ld. CIT(A) and before us. We note that the assessee had admitted in his statement that the material seized during search are ‘Hundi Receipt Book’ which contain details of cash loan taken and cash loan given by the assessee. Although, there is no corroborative evidence showing name of recipient of loan, rate of interest, period etc., however in view of the admission Printed from counselvise.com 54 during the search and appellant failure to discharge his onus u/s 292C of explaining the paper seized from him, we are not in agreement with the contention of the assessee that the seized material is deaf and dumb document. 63. Since the document is not deaf and dumb, the only issue that is to be decided as to whether the whole amount so found to have been recorded in that seized material is to be considered as undisclosed income of the assessee or the year wise peak should be added in the total income of the assessee. We find that it is the prevalent practice in the trade of the assessee to give loan for the duration of 2-3 months and the same is also stated by the assessee in his statement which was not been objected by the AO or the Ld. CIT(A). Hence, to this effect, we find that if we are attributing evidentiary value to the statement under the current case, the statement has to be read as a whole without pick and choose theory and the submission of the assessee in his statement that cash loans are given for 2-3 months must also be given required weightage. 64. We also note that the addition of cash loan, made in the current case, is the sum of each entry appearing in the seized material. This fact is also admitted by the assessee in the statement that the addition of Rs. 3, 11, 00,000/- is the sum of all the entries appearing in the seized material. It is a fact that no other unaccounted income was found during the search. Moreover, the contention of the assessee that cash loans if given is out of repayment received of earlier cash loans cannot be ignored and it would not be proper on the part of the revenue to tax the total of seized material treating the same as cash loans. Further, it is also not in dispute that the seized material is not communicating complete details with respect to Printed from counselvise.com 55 cash loans in a sense that they are not stating clearly with regard to the year to which they relate, name of receiver, period etc. and neither the AO nor the Ld. CIT (A) or the assessee has brought before us any conclusive working about the seized material. We rely on our observation made in our own following judgement: 65. DCIT v. Manoj Kumar Gupta (ITA No. 621 & 622/JPR/2025 “…Since, assessee has not provided the name of any such person, considering the statement of the assessee during post search proceedings, a reasonable income is required to be assessed in the hands of the assessee with reference to the total of transactions noted in these diaries in as much as the total receipt as such cannot be held to be income, more particularly when no corresponding asset or investment or expenditure was found in search…” 66. It is also observed by us that for invoking section 69 of the Act, there has to be an unrecorded/ unaccounted investment and that there cannot be any unaccounted investment without there being any unaccounted income. Therefore, for making any unaccounted investment, the assessee must be in possession of some unaccounted income. This position further supports the case of the assessee that the cash loans given were sourced from the repayment receipt of earlier cash loans since there is neither any evidence on record nor any finding of the AO or the Ld. CIT(A) regarding the sourcing of cash loans from any identified source. 67. Thus, in the light of the above facts and situation, to meet the end of justice, we deem it to proper to give benefit of rotation and also hold that only peak/ incremental peak of cash loans transaction can be added, as income, in the hands of the assessee. The basic idea of applying peak theory under the current case is that the real income of the assessee should be taxed. Accordingly, considering the Printed from counselvise.com 56 duration of loans to be 3 months (no. of rotation of money in a year = 4), the year wise peak/ incremental has been worked out as under: Assessment Year Fresh Cash Loan Peak/Incremental Peal 2013-14 8,83,650 (34,35,600/4) 8,83,650 2014-15 10,49,000 (41,96,000/4) 1,65,350 (10,49,000 – 8,83,650) 2015-16 13,51,250 (54,05,000/4) 3,02,250 (13,51,250 – 10,49,000) 2016-17 15,80,000 (63,20,000/4) 2,28,750 (15,80,000 – 13,51,250) 2017-18 9,86,100 (39,44,400/4) - Total 15,80,000/- 68. As we held above, only real income should be brought to tax, considering the above table, the real income of the assessee for the current year, on account of cash loans given by the assessee, comes to NIL and hence no addition is warranted under the current case. Hence, no addition, for cash loans given by the assessee, is added in the hands of the assessee for the year under consideration. 69. As far as addition made for interest on cash loans is concerned, it has been observed that the AO has made addition of Rs. 15, 44,400/- for the year. On perusal of the assessment order, it is observed that the AO has just relied on the statement of the assessee for making addition however he has not brought on Printed from counselvise.com 57 record any documentary evidence with respect to the interest earned/charged by the assessee on cash loans given by him. In the light of above observations, it can be safely concluded that the whole addition is roaming around the statement of the assessee. In our view, although statement recorded u/s 132(4) has some evidentiary value but assessee could not have subjected to addition merely on the basis of statement recorded u/s 132(4) until the said statement is corroborated by some documentary evidence. It is the duty of the AO to substantiate his addition by bringing something corroborative in support of his claim/ action which is absent in the current case. The Ld. CIT (A) also confirmed the addition ignoring that no incriminating material was found in this regard. Further, the AR of the assessee draws our attention to the seized material relevant for the addition under consideration. On perusal of the seized documents, it has been observed that the same are not speaking anything about the interest charged by the assessee, the year to which it relates and is silent on the said subject. There is no indication from the seized material that interest is charged by the assessee. Mere figure cannot constitute actual transaction until unless corroborated with some evidence. Further, no interest can be added on notional basis. Since, the AO has not brought any evidence which confirms that the assessee has charged any interest on cash loans; we have no hesitation to delete the addition made in the current case. We rely on our observation made in our following judgment: 70. DCIT v. Manoj Kumar Gupta (ITA No. 621 & 622/JPR/2025 “So far as ground of the assessee is concerned, we find from the ledger account of Mohit Trading Co. (PB 128) and Nand Lal Naresh Kumar (PB 129-130), that interest charged by assessee from these concerns is @ 9% p.a. The Ld. CIT(A) has invoked section 40A(2) of the Act in confirming the addition ignoring that AO has not disallowed the expenditure but has made addition for notional interest. There is no section in the Act which Printed from counselvise.com 58 empowers the AO to make addition on account of notional income. In search also no evidence/document was found to indicate that assessee has charged interest from the above parties at rate more than what is recorded in books of accounts. Hence in the absence of any incriminating material found in search, no addition for notional interest can be made. Further how much interest is to be charged is to be decided by the businessman. The AO cannot put himself in the shoes of the businessman to decide as to at what rate he should charge the interest as held by Hon’ble Supreme Court in case of Hero Cycles (P.) Ltd. Vs. CIT(Central) (2015) 379 ITR 347.The Ld. CIT(A)has confirmed the addition invoking Sec.40A(2) of the Act ignoring that this section is applicable when interest is paid to a related party which is excessive or unreasonable. In the present case interest is not paid to these parties but rather interest is charged from these parties and therefore Section 40A (2) of the Act is not applicable. In view of above the addition of Rs. 23, 67,618/- confirmed by Ld. CIT (A) is deleted by allowing the ground of the assessee.” 71. Further, we do not find any justification in the action of the Ld. CIT (A) in enhancing interest income for the year when no documents related to addition were found. Hence, in our considered view, the action of the Ld. CIT (A) is not correct. Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. With these observations, appeal of assessee is allowed and addition is hereby deleted. 72. Now we proceed to address Ground No. 3 raised against the addition of Rs. 13, 47,027/- made on account of interest income on advances given to farmers. The AO made the addition on the basis of seized material marked as Exhbit-10 of Annexure AS of Party-A1. It is the contention of the AO that the said material contains details of advances given to farmers. During the search, the assessee surrendered Rs. 35, 00,000/- pertaining to A.Y. 2012-13 to 2018- 19 against such interest but retracted the same subsequently. The ld. CIT (A) also confirmed the addition made by the AO. Printed from counselvise.com 59 73. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). The AR of the assessee submit that the assessee had not charged interest on the advances given to farmers as it is a normal business practice in his trade to give advances to farmers, without interest, in order to lure them to sell the produce to the assessee. However, the AR of the assessee also stated that the seized material found was not related to the year under consideration rather pertaining to the period 01.04.2018 to 17.04.2018 and the advances appearing in those seized material is also recorded in the books of the assessee. On perusal of seized documents pertaining to interest income on advances given to farmers, it has been observed that the said seized material neither contain any rate of interest nor reference of any interest amount. The rate of 18% taken by the AO itself is not coming out from the seized material rather the AO has presumed such rate which is evident from his order. Hence, it is not in dispute that the interest has been computed by the AO on presumptive basis rather than on the basis of seized material or any documentary evidence. Therefore, we agree with the submission of the AR of the assessee that no addition can be made on the basis of presumptions and without bringing any corroborative material to substantiate that interest has been received by the assessee. Hence, since in the current case, receipt of interest is not coming out from the seized material rather computed on presumptive basis and the seized material itself is not related to the year under consideration and further since no corroborative evidence has been brought by the AO in this regard, we allow this ground of appeal of the assessee and delete the addition of Rs. 13, Printed from counselvise.com 60 47,027/-. Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. 74. Coming to Ground No. 5 where the assessee objected to the invocation of Section 115BBE of the Act under the current case. It is the contention of the AO as well as the Ld. CIT (A) stated that the addition made under section should be taxed as per rate specified under section 115BBE of the Act. As against this, the AR of the assessee submitted that Section 115BBE is applicable with effect from A.Y. 2018-19 accordingly it has no applicability in the year under consideration. We have heard both the parties and also perused Section 115BBE of the Act. We note that the provisions of section 115BBE were amended w.e.f. 15.12.2016, received accent of The President on 17.12.2016 and made applicable w.e.f. 01.04.2017. Accordingly, it should be applicable for the F.Y. 2017-18 and A.Y. 2018-19. We form this view on the basis of the judgement of the Hon’ble Supreme Court Supreme Court in case of Karimtharuvi Tea Estate Ltd. Vs. State Of Kerala 60 ITR 262 wherein it is held that “it is well settled that the IT Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force. In the instant case, there is no escape from the conclusion that the Surcharge Act not being retrospective by express intendment, or necessary implication, it cannot be made applicable from 1st April, 1957 as the Act came into force on 1st September of that year. Since the Surcharge Act was not the law in force on 1st Printed from counselvise.com 61 April, 1957 no surcharge could be levied under the said Act against the appellant in the asst. yr. 1957- 58.” 75. As the section is made applicable w.e.f. 01.04.2017, hence this section will operate on the income referred therein which accrues or arises on or after 01.04.2017. Therefore, even if section 115BBE of the Act is applied, the pre- amended rate of 30% would be applicable and not the amended rate of 60%. Hence, this ground of appeal of the assessee is allowed. 76. In the result, based on above the appeal of the assessee is partly allowed. In IT (SS) A No. 16/JPR/2025 77. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). We have respectfully considered the judicial decisions relied upon by the assessee and the paper book filed by the assessee. Firstly, we take up Grounds of Appeals No. 2 raised with respect to addition made for cash loan of Rs. 50,000/- .We observe from the assessment order and order of the Ld. CIT (A) that a search action under section 132 was carried out in the case of the assessee on 18.04.2018. During the course of search, a cheque inventoried as Exhibit-13 of Annexure-AS of Party-A2 was found and seized. The AR of the assessee has also submitted the material vide his paper book for our perusal. 78. The AO and the Ld. CIT (A) held that the said cheque is received as a security against the cash loan given by the assessee. On the other hand, AR of the assessee highlighted before us that he has not given any cash loan of Rs. Printed from counselvise.com 62 50,000/- and the seized cheque is undated and does not bear the name of the assessee. 79. We have heard both the parties and perused the seized cheque. It is an admitted fact that no other document/ material except the seized cheque is found during the search with respect to the addition under consideration. Hence, it is a mere presumption on the part of the revenue that the seized cheque is a security against the cash loan given by the assessee since there is no evidence to prove that the assessee has in fact given any cash loan of Rs. 50,000/- or not. From the seized cheque, it is clear that the same is undated and not bearing the name of the assessee, therefore, in absence of these crucial details, it cannot be said that the same is a security for cash loan given by the assessee. Hence, the addition of Rs. 50,000/- made by the AO and confirmed by the Ld. CIT(A) is not justified as there is no other corroborative material to support the contention of the AO that the cheque is a security against cash loan given by the assessee and the addition is based on the presumption which cannot be sustained. Hence, the addition is deleted. d) DCIT v. Manoj Kumar Gupta (ITA No. 621 & 622/JPR/2025 “…Since, assessee has not provided the name of any such person, considering the statement of the assessee during post search proceedings, a reasonable income is required to be assessed in the hands of the assessee with reference to the total of transactions noted in these diaries in as much as the total receipt as such cannot be held to be income, more particularly when no corresponding asset or investment or expenditure was found in search…” 80. As far as addition made for interest on cash loans is concerned, it has been observed that the AO has made addition of Rs. 30, 88,800/- for the year. On perusal of the assessment order, it is observed that AO has made addition for Printed from counselvise.com 63 interest on cash loan without adding the cash loan itself which indicate that the AO presumed that the cash loan advanced by the assessee during F.Y. 2012-13 to F.Y. 2017-18 was outstanding till the current year as there is no other possible reason for adding interest without there being any addition for cash loan. However, no documentary evidence in support of this has been brought on record. We further note that the AO has just relied on the statement of the assessee for making addition however he has not brought on record any documentary evidence with respect to the interest earned/charged by the assessee on cash loans given by him. In the light of above observations, it can be safely concluded that the whole addition is roaming around the statement of the assessee. In our view, although statement recorded u/s 132(4) has some evidentiary value but assessee could not have subjected to addition merely on the basis of statement recorded u/s 132(4) until the said statement is corroborated by some documentary evidence. It is the duty of the AO to substantiate his addition by bringing something corroborative in support of his claim/ action which is absent in the current case. The Ld. CIT (A) also confirmed the addition ignoring that no incriminating material was found in this regard. Further, the AR of the assessee draws our attention to the seized material relevant for the addition under consideration. On perusal of the seized documents, it has been observed that the same are not speaking anything about the interest charged by the assessee, the year to which it relates and is silent on the said subject. There is no indication from the seized material that interest is charged by the assessee. Mere figure cannot constitute actual transaction until unless corroborated with some evidence. Further, no interest can be added on notional basis. Since, the AO has not brought any evidence which confirms that Printed from counselvise.com 64 the assessee has charged any interest on cash loans; we have no hesitation to delete the addition made in the current case. We rely on our observation made in our following judgment: a) DCIT v. Manoj Kumar Gupta (ITA No. 621 & 622/JPR/2025 “So far as ground of the assessee is concerned, we find from the ledger account of Mohit Trading Co. (PB 128) and Nand Lal Naresh Kumar (PB 129-130), that interest charged by assessee from these concerns is @ 9% p.a. The Ld. CIT(A) has invoked section 40A(2) of the Act in confirming the addition ignoring that AO has not disallowed the expenditure but has made addition for notional interest. There is no section in the Act which empowers the AO to make addition on account of notional income. In search also no evidence/document was found to indicate that assessee has charged interest from the above parties at rate more than what is recorded in books of accounts. Hence in the absence of any incriminating material found in search, no addition for notional interest can be made. Further how much interest is to be charged is to be decided by the businessman. The AO cannot put himself in the shoes of the businessman to decide as to at what rate he should charge the interest as held by Hon’ble Supreme Court in case of Hero Cycles (P.) Ltd. Vs. CIT(Central) (2015) 379 ITR 347.The Ld. CIT(A)has confirmed the addition invoking Sec.40A(2) of the Act ignoring that this section is applicable when interest is paid to a related party which is excessive or unreasonable. In the present case interest is not paid to these parties but rather interest is charged from these parties and therefore Section 40A (2) of the Act is not applicable. In view of above the addition of Rs. 23, 67,618/- confirmed by Ld. CIT (A) is deleted by allowing the ground of the assessee.” 81. Further, we do not find any justification in the action of the Ld. CIT (A) in confirming the action of the AO ignoring the fact that even the AO has admitted that no cash was advanced by the assessee during the year and no document related to interest was found. Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. Hence, in our considered view, the actions of the AO as well as the Ld. CIT (A) are not correct. With these observations, appeal of assessee is allowed and addition is hereby deleted. Printed from counselvise.com 65 82. Now we proceed to address Ground No. 3 raised against the addition of Rs. 6, 72,723/- made on account of interest income on advances given to farmers. The AO made the addition on the basis of seized material marked as Exhbit-10 of Annexure AS of Party-A1. It is the contention of the AO that the said material contains details of advances given to farmers. During the search, the assessee surrendered Rs. 35, 00,000/- pertaining to A.Y. 2012-13 to 2018-19 against such interest but retracted the same subsequently. The ld. CIT (A) also confirmed the addition made by the AO. 83. We have gone through the assessment order, order of the Ld. CIT (A) and submissions made by the assessee both before the AO and Ld. CIT (A). The AR of the assessee submit that the assessee had not charged interest on the advances given to farmers as it is a normal business practice in his trade to give advances to farmers, without interest, in order to lure them to sell the produce to the assessee. However, the AR of the assessee also stated that the seized material found was not related to the year under consideration rather pertaining to the period 01.04.2018 to 17.04.2018 and the advances appearing in those seized material is also recorded in the books of the assessee. On perusal of seized documents pertaining to interest income on advances given to farmers, it has been observed that the said seized material neither contain any rate of interest nor reference of any interest amount. The rate of 18% taken by the AO itself is not coming out from the seized material rather the AO has presumed such rate which is evident from his order. Hence, it is not in dispute that the interest has been computed by the AO on presumptive basis rather than on the basis of seized material or any documentary evidence. Printed from counselvise.com 66 Therefore, we agree with the submission of the AR of the assessee that no addition can be made on the basis of presumptions and without bringing any corroborative material to substantiate that interest has been received by the assessee. Hence, since in the current case, receipt of interest is not coming out from the seized material rather computed on presumptive basis and the seized material itself is not related to the year under consideration and further since no corroborative evidence has been brought by the AO in this regard, we allow this ground of appeal of the assessee and delete the addition of Rs. 6, 72,723/- Further, since we have deleted the addition, the question of telescoping, as provided by the Ld. CIT (A), does not arise. 84. Coming to issue of invocation of Section 115BBE of the Act under the current case. Since we deleted the additions, there remains no need to adjudicate this matter. 85. In the result, based on above appeal of the assessee is allowed. The Order is pronounced in the open court on 26th day of September 2024. Sd/- Sd/- (Dr. S. SEETHALAKSHMI) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur, िदनांक/Dated: 26/09/2025 Copy of the Order forwarded to: 1. अपीलाथŎ/The Appellant , 2. Ůितवादी/ The Respondent. 3. आयकर आयुƅ CIT 4. िवभागीय Ůितिनिध, आय.अपी.अिध., Sr. DR., ITAT, Printed from counselvise.com 67 5. गाडŊ फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar) ITAT, Jaipur Details Date Initials Designation 1 Draft dictated on PC on 26.09.2025 Sr.PS/PS 2 Draft Placed before author 26.09.2025 Sr.PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr.PS/PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8 Date on which the file goes to the Head clerk 9 Date of Dispatch of order Printed from counselvise.com "
Other Referred Cases
CIT Vs. Brandix Mauritius Holding Ltd., DCIT v. Manoj Kumar Gupta, V. M. Spinning Mills, Swati industries v. The DCIT, Gurdip Cycle Industries v. The DCIT
Laws Referred To
Income Tax Act, 1961
Guide to Charitable Trusts: Formation, Benefits, and Compliance
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1:1 Consultation on Legal Requirements
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Tax Holiday Secrets for Startups
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Affidavit - Application for condonation of delay in filing the appeal before ITAT - Type 2
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Non-Compete Agreement
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