INDER KUMAR NIGOTIYA,JAIPUR V. ITO WARD,1 (1), JAIPUR

ITA 1011/JPR/2025

AI Insights

The case revolves around the appeal by Inder Kumar Nigotiya against the orders of the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) regarding the treatment of interest income earned from market lending declared under the Income Declaration Scheme (IDS) 2016. The ITO had treated the interest income of Rs. 11,01,370 as unexplained money under section 69A of the Income Tax Act, 1961, and taxed it at a higher rate under section 115BBE. The CIT(A) upheld this decision. However, the Tribunal found that the assessee had disclosed the market lending under IDS and the interest earned thereon was a natural consequence of such lending, thus should not be treated as unexplained money.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 771805 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Sreelekha Banerjee v. CIT, Overseas Leathers, Deccan Jewellera (P.) Ltd., Shanti Kumar Sethi & Sons
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: RAJEEV SOGANI
• Keywords: Business income
• Section: 143(3); 68

Judgement Text

" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ,o Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 1011/JP/2025 fu/kZkj.k o\"kZ@Assessment Year : 2017-18 Inder Kumar Nigotiya 3954 Nigotiya House, MSB Ka Rasta Johari Bazar, Jaipur cuke Vs. ITO, Ward 1(1), Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAGPN6846H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Rajeev Sogani, CA jktLo dh vksj ls@ Revenue by : Sh. Gautam Singh Choudhary, JCIT lquokbZ dh rkjh[k@ Date of Hearing : 21/08/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 28/08/2025 vkns'k@ ORDER PER: NARINDER KUMAR, Judicial Member. The present appeal is because the assessee is feeling dissatisfied with the order of the Commissioner of Income Tax (Appeals)-03, Chennai [for short CIT(A) ] dated 29/05/2025 for assessment year 2017-18. The said order of the ld. CIT(A) arises as against the order dated 06.12.2019 passed under section 143(3) of the Income Tax Act, 1961 [ for short Act ] by ITO, Ward 2(1), Jaipur [ for short AO]. Printed from counselvise.com 2 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO 2. In this appeal, the assessee has raised following grounds: - 1. In the facts and circumstances of the case and in law, the Id. ADDL/JCIT(A) has erred in confirming the action of the Id. AO in treating the subsequent interest income earned on Money Lending Transaction declared under IDS, 2016 amounting to Rs. 11,01,370 as unexplained money u/s 69A of the Act. The action of the Id. ADDL/JCIT(A) in confirming the action of Id. AO is illegal, unjustified, arbitrary and against the provisions of Income Declaration Scheme, 2016. Relief may please be granted by treating the interest income as explained. 2. In the facts and circumstances of the case and in law, the Id. ADDL/JCIT(A) has erred in confirming the action of the Id. AO in treating the interest income earned on Money Lending declared under IDS, 2016 amounting to Rs. 11,01,370 as unexplained money u/s 69A of the Act, and invoking the provision of section 115BBE. The action of the Id. ADDL/JCIT(A) in confirming the action of ld. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by treating the interest income as explained and liable for tax at normal rates. 3. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing. 3. Succinctly, the facts as culled out from the record are that the assessee e-filed his ITR for the year under reference on 15.07.2017 vide acknowledgment no. 875328880150717 u/s 139(1) of the Income-tax Act, 1961 (hereinafter referred as \"the IT Act\") declaring total income at Rs. 24,52,460/-. Subsequently, the case was selected for ‘Limited Scrutiny’ to examine the issue \"Cash Deposit during the year\" through CASS and notice dated 09.08.2018 u/s 143(2) was issued and duly served upon the assessee which was complied with. Printed from counselvise.com 3 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO Record reveals that the assessee is engaged in jewellery business in which proprietorship concern M/s Desert Jewellers. The assessee has shown income from pension and income from other sources in his ITR. Ld. AO noted that necessary enquiries were made from the assessee and with banks with regard to cash deposits made by the assessee in his bank account during the year under reference. As is evident from the record the assessee has deposited cash of Rs. 1,62,31,370/-, and that is how, the assessee was asked to prove source of cash deposit made by him in his bank account. The assessee submitted that the source for Rs. 1,30,000/- was out of the business and Rs. 1,61,01,370/- was sourced from the market lending for an amount of Rs. 1,50,00,000/- declared by the assessee in Income Declaration Scheme 2016 and thereby the balance amount pertained to the interest earned on that assets till the realization of the same in cash for an amount of Rs. 11,01,370/-. Ld. AO vide notice dated 30.11.2019 asked the assessee to show cause as to why Rs. 11,01,370/- claimed to be interest should not be treated as unexplained money u/s. 69A of the Act. The assessee relied upon the question no. 8 of the circular no. 25 of 2016 issued by the CBDT wherein it was stated that if an assessee declares undisclosed asset under IDS, 2016 no enquiry would be made from the seller of such property. Printed from counselvise.com 4 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO Since the assessee has disclosed market lending for a sum of Rs. 1,50,00,000/- in cash and thereby that being an asset even for that lending converted into cash and thereby in that process assessee also earns interest of Rs. 11,01,370/-. Ld. AO applying the theory of human probability took a view that since the assessee could not explain the source of cash deposit for an amount of Rs. 11,01,370/- sourced as interest income on that market lending as undisclosed money as per provision of section 69A of the Act. 4. Aggrieved by said finding of the ld. AO, the assessee filed an appeal before the ld. CIT(A). Apropos of the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: 6.5. Thus, in respect of the source for the sum of Rs. 11,01,370, the appellant has made a detailed submission reproduced as above, which states that, the appellant has made \"market lending for a sum of Rs.1,50,00,000 which he declared in IDS and the said amount was received from the parties along with interest and deposited in the bank account during the period from 15-10-2017 to 23-03-2017. Further the appellant claimed that the sum of Rs. 11,01,370 relates to interest for current FY which was received out of the money lending. Furthermore, the appellant has claimed that, since, the appellant has immunity to disclose name of the parties from whom the money was lent, as per Q.No.8 of FAQs circulated by CBDT vide Circular No.25 of 30th June, 2016, the appellant is not bound to disclose the names of the parties from whom the interest was received. 6.6. In this regard, the assessing officer has rightly held that, the Q.No.8 of FAQ, referred by the appellant relates to only the undisclosed asset involving property transaction where the seller of the property will not be enquired. However, in the present case it is the \"cash in hand\" of the appellant which has been claimed to have been lent in Market as \"Money lending\". The appellant in his submissions Printed from counselvise.com 5 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO have stated that, \"what was declared under IDS was Market lending and not cash-in hand\". This claim of the appellant is illogical, since, only cash can be lent in Market and it is not understood, what-else can the appellant lend in market, when he has received back the lent amount in cash along with interest in cash and deposited in bank account. The appellant has further claimed that, as per Q.No.8, \"immunity was granted from enquiries to be conducted from the counter party to the transaction i.e., seller of the asset in that question, and in the present case the borrowers are also counter party to the transaction and the same immunity would be available for them also\". This claim of the appellant is not acceptable, since, in case of the property transaction the seller of the property has to admit capital gain on the amount received, for which the immunity is granted for further investigation. However, in the present case, the borrowers of the money lent, who repay the money back do not generate any income arising out of the said transaction. Hence, the appellant drawing corollary on this issue is incorrect. 6.7. Further, in the scheme of IDS, the immunity was granted to the appellant from disclosing the \"source\" of the income and the manner in which the income is earned. However, in the present case, the sum of Rs.1,50,00,000 lent in Market is an \"application\" of income from which the appellant has claimed to have earned interest. Hence, there is no immunity granted in the scheme to protect the appellant from disclosing the parties from whom the interest income was received during the current FY. Further, the immunity is granted relating to only undisclosed income earned in previous year and admitted to tax under IDS in current FY, while the interest income admitted by the appellant is relating to the income of the current FY for which there is no immunity granted. Hence, the appellant, ought to have disclosed the names of the parties from whom interest income was earned, failing which the source remains unexplained. 6.8. In view of the above, discussion, the order of the assessing officer treating the sum of Rs.11,01,370 as unexplained money U/s.69A is upheld. Accordingly, the appeal is dismissed. 7. Conclusion: In the result the appeal is dismissed. Printed from counselvise.com 6 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO 5. Feeling dissatisfied with the finding so recorded by the ld. CIT(A), the assessee preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. In support of those grounds, the ld. AR of the assessee has filed a detailed written submission which reads as follows : The Assessee declared a sum of Rs.1,50,00,000 under Income Declaration Scheme “(IDS)”, 2016. The Assessee had filed Form No.1 under IDS with the following narration: Market Lending along with interest Rs.1,50,00,000. Department accepted the VDIS and issued Form No. 4 with above narration. The Assessee had paid tax @45% on the above income declared under IDS. The declaration was accepted by the Department. The Assessee deposited the said cash in its bank account on the following dates, (the chart of which is appearing at AO page 3): S. No. Date of Deposit Amount Deposited Source 1 15.10.2016 20,00,000 Market Lending of Rs.1,50,00,000 declared in IDS, 2016 2 24.10.2016 45,00,000 3 18.11.2016 30,00,000 4 30.11.2016 50,00,000 5 8.12.2016 5,00,000 6 8.12.2016 2,00,000 Interest on Market Lending of Rs.11,01,370 7 19.12.2016 3,28,500 8 23.02.2017 2,00,000 9 01.03.2017 2,00,000 10 23.03.2017 1,72,870 TOTAL 1,61,01,370 Since, it was a case of Market Lending, post declaration under IDS, Assessee started recovering the sum from the borrowers along with interest from the date of IDS till actual recovery of the money. The income declared under IDS amounting to Rs.1,50,00,000 and further interest earned thereon, during the intervening period, amounting to Rs.11,01,370 was deposited in the bank. The Assessee filed his Return of Income on 15/07/2017 declaring Total Income of Rs.24,52,460. The Returned Income was accepted vide order u/s 143(3) dated 06.12.2019. However, the interest income of Rs.11,01,370 which was offered for Printed from counselvise.com 7 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO tax in Return of Income was taxed at a higher rate invoking the provisions of section 115BBE. 1. ASSESSING OFFICER Ld.AO sought the details of persons from whom said interest of Rs.11,01,370, for the intervening period, was earned and on Assessee's failure to do so invoked the provisions of Section 115BBE. 2. COMMISSIONER OF INCOME TAX (APPEALS) Ld. CIT(A) dismissed the Appeal holding that Assessee had no immunity from disclosing the names in respect of subsequent interest earning amounting to Rs.11,01,370. 3. SUBMISSIONS 1. The submissions before ld. CIT(A) have been reproduced by ld. CIT(A) in his order on pages 9 to 15 of his order. Ld. CIT(A) has failed to appreciate the submissions in correct perspective. 1.1 Before ld. CIT(A) it was explained that the declaration under IDS was not cash-in-hand, but Market Lending. Modus Operandi of Market Lending was also explained. It was also explained that the interest income was not the past income, but was current income earned after 01-04-2016 i.e. post IDS. [Para 2 page 10 of CIT(A)] 1.2 It was explained that this interest income was earned post IDS from the same parties to whom money was lent on interest. It was further explained that Q. No 8 of FAQs issued by CBDT granted immunity from disclosing the names of counter parties. It was explained that seeking details of such persons would render the said immunity granted vide Q. No 8 as meaningless and would frustrate the very objective of IDS. In the peculiar facts of the present case, the interest income earned, till money is finally recovered, after a short period from the said borrowers, is not a new immunity but extension of IDS immunity. [Para 6 page 11 of CIT(A)] 1.3 The human probability test was in favor of the Assessee as nobody would believe that post IDS, the Assessee waived interest. [Para 9 to 11 page 12] Printed from counselvise.com 8 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO 1.4 It was also submitted that the explanation offered deserves acceptance and reliance was placed on the judgment of Hon’ble Supreme Court in the case of Sreelekha Banerjee v. CIT [1963] 49 ITR 112. [Paras 12 to 14 page 13] 1.5 It was also explained that Assessee having disclosed and paid taxes on Rs.1,50,00,000 would not attempt to save differential tax of 15% on a comparatively meager sum of Rs.11,01,370. [Paras 15 page 13] 1.6 It was also explained that Section 68 converts non-income to income and since income had already been offered for tax in Return of Income filed by the Assessee, section 69A had no application. [Para 17] It is prayed that the said submissions may please be appreciated in correct perspective at this stage. 2. The fact of Assessee opting for IDS for Rs.1,50,00,000 for Market Lending along with Interest is not disputed by the ld. Lower Authorities. 3. Without prejudice to above, it is submitted that Section 69A requires the explanation to be offered about the \"Nature\" and \"Source” of acquisition of money etc. In the instant case, proper explanation is offered regarding the nature. It was explained that the nature of receipt is interest. The said explanation was corroborated by the disclosure made in IDS which had following narration Market Lending along with interest Rs.1,50,00,000. In respect of source also, the explanation given was that the source of interest was the borrowers to whom unaccounted money was lent on interest. The said explanation was also corroborated by the declaration so made under IDS. The interest income, otherwise also, stands explained because, corresponding capital which earned the interest for the intervening period was offered for tax under IDS. It is not the case of Lower Authorities that, without capital having been offered for tax, interest income is claimed to have been earned. Mere non-mentioning of the name and address would not render the income being unexplained. In this regard, parallel is drawn from a case of stock found short at the time of survey. The same is treated as an unaccounted sales and profit earned therefrom is treated as business income even without names of the persons to whom sales are made. Printed from counselvise.com 9 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO Similar position is in respect of excess stock found which is also treated as business income, in spite of the fact, that names of the suppliers of such excess stocks are not available. Reliance is placed on the following judicial pronouncements: - \u0001 [2023] 152 taxmann.com 595 (Chennai- Trib.) Overseas Leathers. \u0001 [2021] 132 taxmann.com 73 (Andhra Pradesh) Deccan Jewellera (P.) Ltd. 4. Assassee’s case is squarely covered by the decision of the. Hon’ble ITAT, Jaipur Bench, in the case of Shanti Kumar Sethi & Sons, in Appeal No. ITA 332/JP/2024. (Copy enclosed). In the exactly identical set of facts, Hon’ble ITAT held as under (Page 19 para 8): “ We have heard the rival contentions and perused the material placed on record. The apple of discord in this case is that whether the interest income received by the assessee after disclosure of the assets in the income declaration scheme till it gets realized, whether that interest income is to be considered as explained source of income or that of the undisclosed income of the assessee as it is evident and undisputed that the assessee has disclosed assets in the form of “Market lending inclusive of interest, against security of hundi, undated cheque and property document as on 31.03.2016”. The purpose of the scheme was to encourage disclosure of hitherto undisclosed income. The assessee who seeks the benefit of the scheme is bound to pay tax, surcharge and penalty. Those who availed themselves of the scheme received immunity from prosecution under the Income Tax Act and the Wealth Tax Act. Certain conditions also provided immunity from the Benami Transactions (Prohibition) Act, 1988. Since the assets have been disclosed by the assessee under the IDS, 2016, therefore, disclosure scheme Rule 4 allows the assessee to file a declaration of income or income in the form of investment in any assets. Based on that set of facts, the declaration made by the assessee was accepted. In the process of receiving back those advances, which were of course in cash but the assess also receive the interest from the declared assets till the assets realized in terms of money. It is not disputed that the assessee has made a declaration for advances given on interest and disclosure of assets in the form of money advanced. The assets along with the interest amount was disclosed along with the modus operandi of doing that money lending activity. The assessee explained that the interest income offered was not the past income, but the income of interest earned on that advances post IDS till the date of realization of the advances by the assessee. The assessee explained that out of the income earned on account of interest, Rs. 43,00,000 was deposited before the demonetization. Hence, based on that set of fact, the logic as explained in reply to question no.8 of circular no. 25 of 2016 is equally applicable to the facts of the present case, when there cannot be disclosure of advances, then as to how the disclosure of interest on that is possible. When the assessee is given immunity not to disclose chicken, then as to how he can disclose the ovum. Thus, the immunity given to the assessee cannot be take away merely on the fact that the assessee has offered the Printed from counselvise.com 10 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO interest for the intervening without disclosing the names of the parties. The assessee cannot be expected to disclose the fact which otherwise given immunity for not disclosing. The case laws relied upon by the ld. CIT(A) are not applicable to the present set of facts, and thus, since the assessee was given immunity, the details of the parties to whom the advances given cannot be asked to the assessee at the back door of explaining the interest when the declaration itself says that the advances disclosed were attached with the interest thereon. In the light of the discussion record ground number 1 raised by the assessee is allowed the immunity not to disclose the name of the parties for which the assessee has realized the advances.” In view of the above, the appeal may please be allowed.” 6. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that once the IDS, 2016 gives immunity for an asset declared by the assessee, how the accrual of income on that assets could be denied merely on the same ground for an assets the assessee was given immunity for not declaring the details thereof and thereby once the Hen cannot be seen how their eggs be seen. He thereby submitted that the assessee has rightly offered that interest income as regular income whereas the ld. AO considered it as undisclosed income to be taxed at a higher rate. Ld. AR of the assessee also argued that similar issue has been decided by this bench in the case of Shanti Kumar Sethi & Sons in ITA no. 332/JP/2024. 7. The ld DR is heard, who relies on the findings of the lower authorities and more particularly advanced similar contentions as stated in the order of the ld. CIT(A). Printed from counselvise.com 11 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO 8. We have heard the rival contentions and perused the material placed on record. The apple of discord in this case is that whether the interest income received by the assessee after disclosure of an asset under in the income declaration scheme till it actually gets realized, will be taxed as explained one or be treated as “undisclosed interest income” of the assessee. Record reveals that the assessee has disclosed assets in the form of “Market lending inclusive of interest, against security of hundi, undated cheque and property document as on 31.03.2016.” The purpose of the scheme was to encourage disclosure of hitherto undisclosed income. The assessee who seeks the benefit of the scheme is bound to pay tax, surcharge and penalty. Those who availed themselves of the scheme received immunity from prosecution under the Income-tax Act and the Wealth-tax Act. Certain conditions also provided immunity from the Benami Transactions (Prohibition) Act, 1988. Since, the assets were disclosed by the assessee under the IDS, 2016, Rule 4 allowed the assessee to file a declaration of income or income in the form of investment in any assets. Based on that set of facts, the declaration made by the assessee was accepted. In the process of receiving back those advances Printed from counselvise.com 12 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO which were of course in cash, the assessee also received interest from the declared assets till the assets were actually realized in terms of money. It is not disputed that the assessee has made a declaration for advances given on interest and disclosure of assets in the form of money advanced. The assets along with the interest amount was disclosed along with the modus operandi of doing that money lending activity. The assessee explained that the interest income offered was not the past income, but the income of interest earned on that advances post IDS i.e till the date of realization of the advances by the assessee. The assessee, based on that set of facts, is entitled to claim as per the clarification given in reply to question no. 8 of circular no. 25 of 2016 issued by the CBDT equally applicable to the facts of the present case. When there cannot be disclosure of advances, how the question of disclosure of interest on that would arise. In other words, when the assessee is given immunity not to disclose chicken, how he can be asked to disclose the eggs. Thus, the immunity given to the assessee cannot be taken away merely on the fact that the assessee has offered the interest for the intervening period without disclosing the names of the parties. The assessee cannot be expected to disclose a fact for which otherwise he Printed from counselvise.com 13 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO has the immunity from disclosing. The case laws relied upon by the ld. CIT(A) are not applicable to the present set of facts and thus, since the assessee was given immunity, the details of the parties to whom the advances were given, cannot be asked from the assessee. In the light of the discussion, ground no. 1 raised by the assessee is allowed the immunity not to disclose the name of the parties from whom assessee has realized the advances and interest thereupon. 9. Ground no. 2 raised by the assessee is charging of tax u/s 115BBE of the Act. Since we have, in ground no. 1, considered the income as arising out of the sourced disclosed, the same cannot be subjected to tax u/s. 68 r.w.s. 115BBE of the Act. Based on this observation, ground no. 2 raised by the assessee is allowed. Result 10. In terms of above observation and findings, the appeal of the assessee is allowed. Order pronounced in the open court on 28/08/2025. Sd/- Sd/- ¼jkBkSM+ deys'k t;UrHkkbZ ½ ¼ujsUnz dqekj½ (RATHOD KAMLESH JAYANTBHAI) (NARINDER KUMAR) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Printed from counselvise.com 14 ITA No. 1011/JP/2025 Inder Kumar Nignotiya vs. ITO Tk;iqj@Jaipur fnukad@Dated:- 28/08/2025 *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Inder Kumar Nigotiya, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward 1(1), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 1011/JP/2025) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar Printed from counselvise.com "