LAXMICHAND JETHALAL DEDHIA ,MUMBAI V. ITO WARD 16(2)(1), MUMBAI

ITA 2433/MUM/2025

AI Insights

The case revolves around the additions made to the income of Laxmichand Jethalal Dedhia, alleged to be unexplained cash loans and related expenses, based on a search and survey operation linked to M/s Evergreen Enterprises. The Assessing Officer (AO) made additions under sections 69A and 69C of the Income Tax Act, 1961, citing evidence from the survey, including a diary and statements from partners of Evergreen Enterprises. The assessee contested these additions, arguing the lack of direct evidence and the unreliability of third-party statements, which were later retracted. The Commissioner of Income Tax (Appeals) upheld the AO's decision, leading to the appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717235 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Appeal Filed On: 08-04-2025
• Other Referred Cases: Parag Motilal Savla vs. ITO, Mayur Kanjibhai Shah vs. ITO, Parag Motilal Savla vs. NFAC, Delhi, Rajeshkumar Rameshchandra Shah vs. DCIT, PCIT vs. Krutika Land (P) Ltd., Common Cause (A Registered Society) vs. Union of India, CBI vs. Shukla, Global Star Realtors Pvt. Ltd. vs. DCIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADITYA RAI
• Assessee Lawyers: ASHOK SHARMA; LD
• Keywords: Set aside; Unexplained expenditure; Documents seized; Onus to prove; Retraction; Search and seizure
• Section: 147; 148; 142(1); 132; 131; 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER & SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER ITA No. 2433/Mum/2025 (Assessment Year: 2012-13) LaxmichandJethalalDedhia 6, Dnyan Mandir Road, Ash Lane, Dadar West, Mumbai- 400 028 Vs. ITO Ward 16(2)(1), Aayakar Bhavan, Mumbai-400 020 PAN/GIR No. AADPD0017D (Applicant) (Respondent) Assessee by Shri Ashok Sharma, Ld. AR Revenue by Shri Aditya Rai, Sr. DR Date of Hearing 04.08.2025 Date of Pronouncement 12.08.2025 आदेश / ORDER PER RAJ KUMAR CHAUHAN, JM: This appeal is directed against the order dated 11.02.2025 passed by the Ld. Commissioner of Income Tax (Appeal), Addl/JCIT (A), Panchkula (herein after referred as “Ld. CIT(A)” u/s 250 of the Income-tax Act, 1961 (herein after referred as “the Act”), wherein theaddition of Rs. 5 lakhs made u/s 69A of the Act alongwith addition on interest of Rs. 5 lakhs on the loan amount and also Rs. Printed from counselvise.com 2 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia 3000/- as expenses added u/s 69C of the Act as unexplained expenditure, made vide assessment order dated 18.12.2019 was confirmed. 2. The brief facts as culled out from the proceedingsbefore the authorities below are that a search and survey action u/s 132 of the Act was carried out inthe case of M/s. Evergreen Enterprises of which Mr. Nilesh Bharani is one of the partners in M/s. Evergreen Enterprises. On the basis of documentary evidences found in the search as well as statement on oath of Mr. Nilesh Bharani recorded u/s. 132(4) of the Act, it was disclosed that the said firm was engaged in borrowing and lending money of unaccounted cash. One of the individuals /business concerns who have lent cash loan through Mr. Nilesh Bharani/Evergreen Enterprices became known from the ledger account maintained on a loose paper as under:- Sr. No . Code Name as per ledger Coded Amoun t (in „000‟) Actual amoun t in Rs. Contact Person Contact Number F.Y. 1. B/08/P L LaxmichanDedhi a 500 50000 0 Laxmichan d 981987484 9 2011 -12 3. On the basis of this alleged material, the revenue concluded that assessee has lent cash of Rs. 5 lakhs in the FY 2011-12. The return of income of Rs. 2,28,089/- was filed on 27.07.2012. Subsequently, the case was reopened u/s 147 of the Act after recording reasons by issue of notice u/s 148 of the Act and the reasons for reopening Printed from counselvise.com 3 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia was provided to the assessee. Further the notice u/s 143(2) dated 01.11.2019 and notice 142(1) of the Act dated 02.11.2019 alongwith questionnaire was issued and served upon the assessee. The assessee filed the reply to the show cause notice dated 12.12.2019 stating that reference of some Dhruwin Fashion was given stating that the name Dhruwin Fashion mentioned in the diary page was pertaining to the assessee. The assessee denied having given any cash loan. It was also stated in the reply of the assessee that in the copy of page diary received from the AO, there was no mention of the assessee in the same and there was no details pertaining to the assessee as well as the telephone and address were not pertaining to the assessee. It was further stated that Nilesh Bharani has retracted his statement andthat merely a loose sheet and third party admissions cannot be considered as conclusive evidence against the assessee and is not sufficient to make the alleged addition. Ld. AO however, was not convinced by the submission of the assessee and made the alleged addition u/s 69A and 69C of the Act respectively. 4. Aggrieved by the said addition, the assessee preferred the appeal before Ld. CIT(A) who has dismissed the same by writing 33 pages order which contained the entire assessment order and the conclusion was made only in last 2 pages which we will discuss later on. Printed from counselvise.com 4 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia 5. Thus aggrieved by the order of Ld. CIT(A) the present appeal has been filed and following ground has been raised by the appellant / assessee. 1. On the facts of the case the learned AO erred in holding and learned CIT(A) erred in confirming addition of Rs 5,00,000/- being cash loan advanced u/s 69A 2. On the facts of the case the learned AO erred in holding and learned CIT(A) erred in confirming addition of Rs 75,000/- interest @ 15% for full year on said cash loan. 3. On the facts of the case the learned AO erred in holding and learned CIT(A) erred in confirming addition of Rs 3,000/- being brokerage on said cash loan u/s 69C 4. Appellant craves, leave to add, alter and/or modify any ground of appeal before or at any time of hearing of Appeal. 6. We have heard Ld. AR and Ld. DR and examined the record.At the outset, Ld. AR submitted that the addition has been made without any corroborative evidence and the additions were made and the case was reopened on the basis of inadmissible material. Ld. AR further submitted that the Ld. CIT(A) has passed a cryptic and unreasoned order while confirming the assessment order. 7. Ld. DR on the other hand relied on the order of Ld. CIT(A) and submitted for dismissal of the appeal of the assessee. Printed from counselvise.com 5 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia 8. We have considered the rival submissions and perused the material placed on record. We have notice that the Ld. AO has discussed the reply to the show cause notice given by the assessee in para 4.4 of the assessment order, which is extracted below:- “4.4. Answer to the assessee's reply to show-cause dated 17.12.2019 is discussed as under: a. The assessee denied of having given any cash loans Even if the assessee has denied lending of cash loans, there is substantial evidence against the assessee like the statements of Shri Nilesh Bharani, partner of M/s. Evergreen Enterprises, Shri Ashwin Rathod, accountant in M/s. Evergreen Enterprises. Hence, it is clear that the assessee has advances cash loan of Rs.5,00,000/- b. As per the assessee, the statement of third party cannot be relied upon against the assessee without any corroborative evidence on record and without providing the same to the assessee and that statements made u/s. 131 of the I.T. Act cannot be relied upon This contention of the assessee has been duly considered and found unacceptable. These statements were given and confirmed under oath that the statement given and confirmed by them are true and correct and without any undue influence. Moreover, this statement has been given to quasi- judicial officers and has evidentiary value under the Indian Evidence Act. Also, this statement has not been retracted by them at any time. Also, the evidence stated by them, was found during the survey operations and duly inventoried as evidence. A diary containing the contact details of the assessee impounded from the premises containing details of the assessee is made Printed from counselvise.com 6 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia part of this assessment order and annexed to this order as Annexure 'C'. The contact details are: LaxmichandDedhia A-56, Soman Nagar 5th Floor, K Balmukund Marg, Chinchpokli opp. Voltas Landline-022-65592355 Mobile [phone] C. Moreover, in the letter dated 16.12.2019, the assessee has submitted as under: \"As regards the copy of a page of diary received by us, again there was no mention of the assessee in the same. Statements provided to us mentioned that they wrote name, code number, and outstanding amounts of the lenders.\" Although the assessee has stated that his name is not mentioned in the statement, but the assessee has failed to appraise that the books of account of Evergreen Enterprises seized in the form of diary pages is made part of the statement and have been thoroughly examined in the statement. Thus, it is proved beyond doubt the assessee's name appeared in the books of accounts of Evergreen Enterprises found and seized during the search/survey. Now, the basic premise of section 292C of the Act has been fulfilled and therefore the retraction by Mr. Nilesh Bharani and his employees will not give any benefit-of- doubt/relief to the assessee. Therefore, Mr. Nilesh Bharani and his employees' retraction will have no effect on basic presumption under section 292C of the Act regarding books of accounts seized during the search and seizure. Therefore, relief claimed by the assessee on this ground cannot be given.” Printed from counselvise.com 7 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia 9. The above observation and finding of Ld. AO were challenged before the Ld. CIT(A) and the Ld. CIA(A) has confirmed the said findings in para no. 6 and 7 of its order, which is extracted below:- “6. Decision: 6.1. On Ground of Appeal No. 1:- The appellant has filed an appeal against the assessment order passed by the learned Assessing Officer (A.O.), who made an addition of Rs. 5,00,000/- as unexplained money under section 69A of the Income Tax Act, 1961 (the Act), along with an addition of Rs. 75,000/- on account of interest on the alleged unexplained money and Rs. 3,000/- as unexplained expenditure related to the brokerage charged by M/s. Evergreen Enterprises. The additions were made in respect of certain cash transaction involving loan advanced by the appellant, which the appellant claims as not undertaken by him. 6.2 The appellant has strongly denied giving any cash loan of Rs.5,00,000/- to M/s. Evergreen Enterprises. He has submitted that the statement of third-party individuals such as Shri Nilesh Bharani (partner of M/s. Evergreen Enterprises) and Shri Ashwin Rathod (accountant) should not be relied upon in the absence of corroborative evidence and that the statements made under section 131 of the Act cannot be treated as conclusive proof. Furthermore, the appellant has argued that the retraction by these third parties should be given due consideration, as there is no direct link to the appellant in the documents recovered during the survey. 6.3 Upon careful consideration of the facts, evidence, and arguments presented by the appellant and the facts mentioned Printed from counselvise.com 8 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia in the assessment order by the AO, I am of the opinion that the assessment order passed by the learned A.O. is justified and sustainable under the law. The key aspects of the case are that the unexplained money u/s 69A of the Act provides that where any sum of money is found to be in the possession of the assessee and the source of such money is not explained, such money is treated as unexplained income and added to the total income of the assessee. In this case, the evidence found during the survey operation, including the statements of the third parties (Shri Nilesh Bharani and Shri Ashwin Rathod), and the seizure of the diary containing the appellant's contact details, clearly indicate that the appellant had advanced the cash loan of Rs. 5,00,000/- through M/s. Evergreen Enterprises. The appellant has failed to provide a satisfactory explanation or evidence to counter these findings. The appellant's contention that the statements of third parties should not be relied upon due to the absence of corroborative evidence is not tenable. Further, the documents seized during the survey (including the diary with the appellant's name) are valid and admissible under section 292C of the Act, which provides that where books of accounts or documents are seized, there is a presumption of their correctness unless proved otherwise by the appellant. Further, the A.O. has rightly added Rs. 75,000/- as interest on the unexplained loan at the rate of 15%, and Rs. 3,000/- as brokerage, which was charged by M/s. Evergreen Enterprises. Since the loan of Rs.5,00,000/- was established, it is logical and reasonable to assume that the appellant would have received interest on the same. Additionally, the brokerage charged by M/s. Evergreen Enterprises, which is an expenditure incurred in the course of lending the money, was Printed from counselvise.com 9 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia also rightly added to the appellant's income under section 69C of the Act. 6.4 Based on the facts, evidence, and judicial precedents, it is found that the A.O. has rightly made the additions of Rs. 5,00,000/- as unexplained money u/s 69A, Rs. 75,000/- as interest receipt and Rs.3,000/- as unexplained expenditure u/s 69C of the Act. The appellant has failed to discharge the burden of proof placed on him to disprove the findings of the A.O. In view of these facts, the additions made by the AO are confirmed and this ground of appeal is dismissed. 7. In the result, the appeal is dismissed.” 10. On careful examination of the findings of Ld. CIT(A), we have noticed that the Ld. CIT(A) has not raised any point of determination and did not give any acceptable reason for confirming the addition made by the AO. The order of Ld. CIT(A) is found cryptic and unreasoned and is liable to be quashed on this sale ground only. However, we have considered the respective submissions of both the parties. Ld. AR has referred and relied on 4 cases of Jurisdictional Coordinate Benches where additions were made on the basis of search and survey action in the case of M/s Evergreeen Enterprises. The said cases are as under:- 1. Parag Motilal Savla vs. ITO, ITA No. 4220/MUM/2023 order dated 29-04-2024. 2. Mayur Kanjibhai Shah vs. ITO, ITA No. 3243/MUM/2023, Order dated 31-01-2024. Printed from counselvise.com 10 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia 3. Parag Motilal Savla vs. NFAC, Delhi, ITA No. 4221/MUM/2023, Order dated 06-01-2025. 4. RajeshkumarRameshchandra Shah vs. DCIT, ITA No. 5568 to 5573/MUM/2024, Order dated 31-01-2025. 11. The case of Mayur Kanjibhai Shah, ITA No. 3243/Mum/2023 (supra) is identical to the facts of the case in hand where the alleged documents recovered during the survey and addition made on the basis of said documents, was duly considered by the Ld. Coordinate Bench. The relevant portion of the said order in para no. 9 to 12 are extracted below:- “9. Heard the parties and perused the material available on record and given thoughtful consideration to the rival claims of the parties and peculiar facts and circumstances of the case. It is very much clear from the impugned order that the same is an un-reasonable order and passed in cryptic manner, therefore, on this aspect itself, the impugned order is liable to be set aside. However still we want to go to the merits of the case. We observe that the Assessing Officer made the additions mainly on the ground that Shri Nilesh Bharani in his statement recorded under section 132(4) of the Act has admitted that he was in the business of lending / borrowing money in cash (unaccounted and undisclosed business). Further, in the course of search, a diary has been seized wherein inter- alia following entries have been recorded and the Assessee‟s name is also appearing in the same diary in coded word. For clarity ready reference, we are again reproducing the entries relied upon by the Assessing Officer:- Printed from counselvise.com 11 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia “i) Code E/11/N- ii) Name as per Ledger „NENSIBHI ELLA‟ iii) Coded Amount (in „000) – 32500 iv) Contact person NANCYBHAI – v) F.Y. 2011-12 10. It is an admitted fact that the Assessing Officer has not entertained the Assessee‟s request for cross examination of Shri Nilesh Bharani / M/s Evergreen Enterprises and also it is a fact that Shri Nilesh Bharani subsequently retracted his statement. Therefore, his statement made earlier become doubtful as claimed by the Assessee and cannot be relied as substantive evidence. Even otherwise, we have failed to understand that how the name as mentioned in the said diary, as „NENSIBHI ELLA‟ can be attributed to the Assessee‟s name. Further, how the coded amount of Rs.32,500 can be construed as Rs.3,25,000,00/-. Further, how the Assessee is connected with the said narration of entries written in diary. Further, as per Assessee‟s claim, the mobile number noted in said diary is even otherwise do not belong to the Assessee and the Assessing Officer also failed to verify the owner of the said number to connect with the Assessee. 11. We by giving thoughtful consideration to specific facts and circumstances of the case, are of the considered view, that retracted statement of Shri Nilesh Bharani/ M/s Evergreen Enterprises who otherwise neither named nor specified the role and also not connected the Assessee specifically and the aforesaid facts/entries made in the diary as noted above by us, in fact, is not at all substantive material to make and sustain the addition as done by the authorities below in this case and, therefore, we are inclined to delete the addition. Consequently, the addition under consideration stands deleted. Printed from counselvise.com 12 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia 12. In the result, appeal filed by the Assessee stands allowed.” 12. Admittedly the said documents in this case before us were not in the name of the assessee and the table containing the name of the assessee was found in a loose paper sheet and in that regard, the Ld. AR has further relied following 2 cases of the Hon‟ble Supreme Court as under:- i) PCIT vs. Krutika Land (P) Ltd. 103 taxmnn.com 9 (SC) ii) Common Cause (A Registered Society) vs. Union of India (2017) 77 taxmann.com 245 (SC) iii) CBI vs. Shukla (1998) AIR SC 410 (SC) 13. Regarding the application of section 292C of the Act as the AO was of the view that the documents recovered during the survey were admissible u/s 292C of the Act, the Ld. AR argued that section 292C of the Act can be invoked only against the person in whose premises / possession, the said incriminating material was found during the course of search action u/s 132 of the Act. It was further submitted that the word „such person‟ used in section 292C of the Act is only referable to the person in whose premises the things or materials were found in possession or control at the time of search action. In support of these arguments, Ld. AR relied on the case of Global Star Printed from counselvise.com 13 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia Realtors Pvt. Ltd. vs. DCIT, ITA No. 40 to 44/Bang/2024, order dated 24.03.2025 wherein it was held as under:- “11.23 The word \"such person\" used in section 292C of the Act is only referrable to the person in whose premises the things or materials were found in possession or control at the time of search. Admittedly, the assessee before us was not person in whose premises, the things were found in possession or control at the time of search action. Therefore, provisions of section 292C of the Act cannot be invoked to assist the department, which is without any basis and contrary to law. In our opinion, if any document is found in the premises/possession/control of such person which belongs to the other person then the said documents can be used for making the addition, however, it is necessary to prove that the saiddocument is incriminating in nature and belongs to other person. The presumption u/s 292C of the Act can only be invoked against such/searched person and not against another person like person before us. The above said proposition is based and relatable to the Evidence Act which casts data of a person in whose possession, a thing or article was found to discharge the burden that it does not belong to him.” 14. It is thus evident that the alleged additions were made on the basis of search and survey action during which so called ledger account allegedly maintained on a loose paper was found wherein the name of the assessee was found mentioned alongwith alleged address and telephone number and the amount mentioned as 500 only. It was categorically submitted by the Ld. AR that mobile number and address does not pertain to the assessee and the loose paper which just mentioned the name of the assessee is not admissible evidence unless corroborated by other sufficient admissible evidence. We are convinced by the argument of Ld. AR because nothing has been brought to our notice on the basis of which revenue authorities has coded the information contained in the loose paper and there is no material which may connect the assessee to Printed from counselvise.com 14 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia Dhruvin Fashion who has allegedly lent loan to M/s Evergreen Enterprises. 15. From the above discussion and the case relied by the Ld. AR and the judgment of Hon‟ble Coordinate Benches where addition made on the basis of same survey action report, were deleted, we are convinced that the requirement of section 69A and 69C of the Act were not fulfilled in this case. In the assessment order, the Ld. AO did not consider the points raised by the assessee in an objective manner and has passed the assessment order on his subjective satisfaction. Ld. CIT(A) also has failed to pass a reasoned order u/s 250(6) of the Act. 16. For these reasons, the impugned order suffers from legal infirmity and is not legally sustainbale in the eyes of law. Hence, the impugned order is set aside and the grounds raised by the assessee are allowed. Accordingly, we direct the AO to delete the addition so made. 17. In the result, the appeal is accordingly allowed in above terms. Order pronounced in the open court on 12.08.2025. Sd/- Sd/- (OM PRAKASH KANT) (RAJ KUMAR CHAUHAN) ACCOUNTATN MEMBER JUDICIAL MEMBER Mumbai, Dated 12/08/2025 Dhananjay, SPS Printed from counselvise.com 15 ITA No. 2433/M um/ 2025 LaxmichandJethalalDedhia आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई/ DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai Printed from counselvise.com "