PRADEEP JAIN,JAIPUR V. DCIT-CENTRAL CIRCLE-2, JAIPUR

ITA 937/JPR/2025

AI Insights

The case revolves around the appeal by Pradeep Jain against the assessment order for the year 2017-18, which included additions for unexplained sources of income and undisclosed interest income. The additions were initially made by the Assessing Officer following a search and seizure operation and were upheld by the CIT(A). The Tribunal's decision to allow the appeal was based on the finding that the Assessing Officer did not conduct a thorough investigation to substantiate the claims of unexplained cash credits and undisclosed income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780128 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 23-06-2025
• Other Referred Cases: M. Ganapathi Mudaliar, (1964) 53 ITR 623 (SC), A. Govindarajulu Mudaliar v. CIT, (1958) 34 ITR 807 (SC), Roshan di Hatti v Commissioner of Income-tax, (1977) 107 ITR 938 (SC), Kale Khan Mohammad Hanif v. CIT, (1963) 50 ITR 1 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALKA GAUTAM
• Assessee Lawyers: AVINASH KHANDELWAL
• Keywords: Unexplained cash credit; Peak credit; Onus to prove; Search and seizure
• Section: 142(1); 132; 68; 131; 133A

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B-Bench” JAIPUR Jh xxu xks;y] ys[kk lnL; ,oa Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRIGAGAN GOYAL, AM& SHRI NARINDER KUMAR, JM vk;dj vihyla-@ITA No. 937/JPR/2025 fu/kZkj.k o\"kZ@AssessmentYear : 2017-18 Pradeep Jain 1-B, Laxman Colony, Shyam Nagar, Jaipur. cuke Vs. The DCIT, Central Circle-2, Jaipur. LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.: AATPJ2548M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Avinash Khandelwal, C.A. jktLo dh vksjls@Revenue by: Smt. Alka Gautam, CIT lquokbZ dh rkjh[k@Date of Hearing :07/10/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 08/10/2025 vkns'k@ORDER PER: NARINDER KUMAR, JUDICIALMEMBER . Assessee-appellant herein, was in appeal before Learned CIT(A), while challenging the assessment order dated 27.12.2019, passed by the Assessing Officer, as regards assessment year 2017-18. That appeal came to be dismissed. As a result, two additions i.e. one of Rs. 40,00,000/- due to unexplained source of transactions of loans and advances, and another of Printed from counselvise.com 2 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur Rs. 1,37,000/-, due to earning of interest on the said amount during financial year 2016-17 on cash loans and advances, levied u/s 68 of the Act, came to be sustained. Hence, this appeal by the assessee. 2. Arguments heard. File perused. First the Facts 3. As is available from the assessment order dated 26.12.2019, a search and seizure action, u/s 132 of the Act and /or survey action u/s 133A of the Act was carried out by the income tax department on the members of Kiran Fine Jewellers Group on 02.08.2017. Assessee is one of the members of said group. The assessee filed return of income for the previous year i.e. 2017- 18, relating to the assessment year under consideration, declaring total income of Rs. 20,37,690/-i.e. the income already declared in the return initially presented under section 139(1) of the Act on 29.3.2018. 4. Notice u/s 143(2) of the Act, dated 1.10.2019 is stated to have been issued and served upon the assessee. Then notice under section 142(1) dated 1.10.2019 was issued to the assessee, and he furnished information Printed from counselvise.com 3 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur and details pertaining to the case. Subsequently also, such notices were issued. Representative of the assessee furnished information called for. Ultimately, assessment order dated 27.12.2009 was passed against the assessee. Search & Seizure Operation at the premises of Ajay Gangwal 5. Case of the department is that during search and seizure operation on the premises of Shri Ajay Gangwal at F-32, Azad Marg, C-Scheme, jaipur, various incriminating documents were seized as per inventory Annexure-A consisting on Exhibit- 1 to 17. Out of abovesaid documents, Exhibit-11 to 13 are stated to have been found from the chamber of the assessee. During search proceedings, the assessee is stated to have accepted that Exhibit-11 pertained to him. 6. Exihibit-12 is one of the seized incriminating material. It is case of the department that the transactions recorded in Exhibit-12 pertained to cash transactions, not reflected by the assessee in the books of account. Further, it is case of department that in post search enquiry, statement of the assessee was recorded on 20.11.2017, the assessee Printed from counselvise.com 4 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur disclosed that the amount of the transactions mentioned in the said Exhibits were not actual figures as 2 ZEROs were suppressed/concealed. 7. On the other hand, as regards Exhibit-12, the assessee is stated to have explained that the transactions noted on 11 pages of the said Exhibit- 12 were of cash loans advances and payment received back, and further that said transactions were not declared in the return of income. 8. It is case of the department that peak credit theory relating to entries of cash receipts and payments noted on the above said 11 pages of Exhibit-12 was applied while working out for the purposes of tax liability. 9. On 01.10.2019, a detailed show cause notice was issued to the assessee. In reply to the said show cause notice, this time the assessee claimed that the said transactions noted on Exhibit-12 were cash loans and advances taken/provided by one party to another, and that he –the assessee - acted merely as a broker. 10. The Assessing Officer considered the above said reply to the show cause notice, as regards the above said transactions recorded on Exhibit- Printed from counselvise.com 5 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur 12 , but, said claim did not find favour with the Assessing Officer, due to the following reasons:- “(i) Nothing was brought on record by the assessee to substantiate forementioned claim neither these persons were produced nor their whereabouts were furnished during the course of assessment proceedings. Even confirmation of these persons was not furnished. (ii) Even in the return of income filed by the assessee there was no brokerage income. (iii) Further, during the post search enquiry the assessee himself admitted that the transactions noted on the said pages are of the cash loan advanced and payment received back by him. (iv) Since, identity of person advancing loan and the person accepting loan is not clear, the transaction recorded on these pages are believed to be of the assessee himself only and therefore peak of these transaction is worked out, which comes of Rs. 40,00,000/- on 09.12.2016 relevant to AY 2017-18.” 11. Ultimately, the Assessing Officer arrived at the conclusion that the assessee had failed to explain the source of the abovesaid transactions mentioned in the assessment order, and consequently treated the same as unexplained cash credit in the hands of the assessee, while resorting to the provisions of Section 68 of the Act. 12. As noticed above, on the aforesaid conclusion, addition of Rs. 40,00,000/- was made. The other addition of Rs. 1,37,000/- pertained to interest income on the cash loans and advances by the assessee during Printed from counselvise.com 6 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur the above said financial year, treating the said income as undisclosed interest income. Matter reaches CIT(A) 13. When the matter came up before Learned CIT(A), while dealing with the said issue of cash loans and advances, Learned CIT(A) dealt with the grounds and submissions raised by the assessee-appellant and concluded that the assessee had failed to proof satisfactorily, sources and nature of the credit entries and also not discharged the onus to prove the identity, genuineness and creditworthiness of the creditors. Consequently, Learned CIT(A) sustained the first mentioned addition, and the other addition of interest income on the cash loans and advances. 14. The findings recorded by Learned CIT(A) as available in para 5.2, page 31 of the impugned order, read as under:- “The appellant has contended in the appeal that the seized record itself proving that the assessee received payment from one party and the same passed on to another party and the assessee only acted as a broker. The assessee neither made any advance of any amount to any party from his own source nor he took loan or deposit of any amount from any party. The interest of the assessee in these transactions was limited to the brokerage income which also could not earn because after the search due to legal dispute the parties did not cooperated to the assessee and the assessee could hardy recover the principal amount from borrower party and return the same to the lender party. Printed from counselvise.com 7 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur The appellant has also contended regarding the finding of the Id AO held that assessee has not produced persons and their confirmation was not furnished during the assessment proceeding, that, the assessee is not is possession of any information more than to whatever available in the seized record. After the search, the assessee has stopped doing the new business of finance brokerage with these parties and the assessee is not in touch with the parties. Further, when the parties came to know the fact that certain documents of finance business have been seized by the I. Tax department and the same may lead to them in problem, and in such fear those parties also left contact with the assessee. It is further relevant to mention here that being the cash transaction none of parties has provided their details and confirmation. Having perused the assessment order and the submissions of the appellant it is noticed that the appellant acted in giving and taking of loans in his own personal capacity. When the seized Exhibit-12 is perused, its reveals that the appellant received the funds from the person naming Sandeep and Ajay and further the funds were lent to the different parties. The amounts are also different. In case of broker, he merely acts as the link or the connection and generally the names of borrower and lender are known to each other. The amount of funds borrowed and lent in one transaction is the same. The Page No. 3 of Seized Document in which on the header it has been mentioned 'Ajay ji show how the loan taken from 'Ajay ji' has been utilised or further loaned by the appellant. Similar is the status of the Page No. 1-2 of Seized Document. Further regarding the submission of the appellant that section 68 is not applicable, it is observed that the loan transactions have been recorded by the appellant in a proper rojnamcha or proper account book manner. The title on each page is \"ledger and are bounded in a book. The funds were received by the appellant and the appellant has not filed the confirmation, balance-sheet, ITR, PAN etc. of the persons from whom the appellant has claimed to have received the funds. The appellant has not discharged the onus with respect to proving the identity, genuineness and creditworthiness of the credits received.” 15. In support of the above observations, Learned CIT(A) relied on the following decisions:- Printed from counselvise.com 8 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur  M. Ganapathi Mudaliar, (1964) 53 ITR 623 (SC).  A. Govindarajulu Mudaliar v. CIT, (1958) 34 ITR 807 (SC).  Roshan di Hatti v Commissioner of Income-tax, (1977) 107 ITR 938 (SC)  Kale Khan Mohammad Hanif v. CIT, (1963) 50 ITR 1 (SC). 16. Hence, the appellant is before this Appellate Tribunal. Contentions 17. Ld. AR for the appellant has submitted that from the seized material it can safely be inferred that the transactions recorded on Exhibit 12 were actually not transactions of cash loans and advances by the assessee, and rather, said entries were recorded by the assessee as a broker/commission agent, in respect of loans and advances between other parties, and that he was to charge only brokerage/commission. In this regard, Ld. AR has laid emphasis on the writings available at page 3, which forms part of the above said seized document Exihibit-12. On the other hand, Learned DR for the department has submitted that she stands by the reasons recorded by the Assessing Officer and CIT(A), and that present appeal deserves to be dismissed. Printed from counselvise.com 9 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur Discussion 18. As per settled legal proposition, onus to prove that it is a case of brokerage and that the assessee acted only as a broker, is on the assessee. In this regard, the assessee could prove written contracts or agreements with third parties wherein it was specifically recorded that the assessee was to act as an intermediary or a broker, and that he was to be paid commission or brokerage at such and such rate. But, here, the assessee failed to prove any written contract or agreement with third parties. 19. Assessee could also prove by leading evidence that the amounts shown in the incriminating material as received by him from third parties or paid by him to the third parties did not belong to him and rather said amount came to be routed by the actual lender to the borrower through him. On going through the contains of page 1 &2, and 3 on Exhibit- 12, we find that on the left side corner words “© 0.80” and “Int. + Comm” (0.80) respectively, stand recorded. Printed from counselvise.com 10 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur From the said writing on the left side corner of said pages, part of Exhibit-12, it can be inferred that the assessee acted as middle man/broker in receiving money from some persons and in paying the same to others. In the incriminating material, on the left side of page 1 and 3, where total amount finds mention, is the name of one person, and on the right side of the page, where different amounts find mention, is/are the name(s) of several other(s), and the amount on the left side tallies with the total of the amounts mentioned on the right side. In this regard, reliance may also be placed on the table available in the assessment order. In this case, even though the assessee has not brought on record any written contract or agreement with 3 parties regarding receipts or payments of the said amounts, it can safely be inferred that the money, to which the transactions pertain, did not belong to the assessee. 20. Another significant aspect on which the assessee is required to lead clear and verifiable evidence that he charged only brokerage or commission and not any income by way of interest on the specified amounts of loans or advances. Printed from counselvise.com 11 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur It is true that in this regard, the assessee could prove that he used to maintain a separate bank account for receiving such fees; or that he used to issue invoices for rendering brokerage services, and that his Profit & Loss A/c clearly showing this income can be presented as evidence. It is also true that no such evidence has been led by the assessee in the form of separate account or invoice or Profit & Loss Account depicting his income, but, we also take note of the fact that it is not case of the department that any piece of incriminating material revealed that the assessee had actually charged any amount by way of interest on the amounts recorded therein. 21. In order to lend corroboration to the claim of the assessee, evidence by way of affidavits of or statements by the actual lenders confirming that the assessee acted merely as a broker would be required to be led. As is available from record, no such affidavit was furnished by the assessee during assessment or appellate proceedings. Statement made by the assessee during search action proceedings or post search action enquiry to the effect that he had charged only commission or broker, even if self-serving material, may form the basis or Printed from counselvise.com 12 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur foundation of his claim in the assessment proceedings, only when corroborated by evidence to prove said claim, as per given facts & circumstances. It would help estimate a reasonable brokerage income, and in not levying tax on the entire amount as undisclosed income. Here, as is available from record, the version put forth by him in his statement made during search proceedings is different from the version subsequently put forth in the statement made after search proceedings or say, in the statement under section 131 of the Act. It is true that it was for the assessee to produce persons whose names find mentioned in the said incriminating documents, for the purpose of their examination, in proof of identity, genuineness of the claim and creditworthiness of the concerned persons and the transactions. At this stage, reference may be made to page 18 of the Paper Book furnished by Learned AR for the assessee before this Bench. This page is part of the statement made by the assessee on 3.8.2017. From this statement, it transpires that the assessee had furnished mobile phone numbers of Appu-Anurodh Jain, Amit Sharma, Aashish Printed from counselvise.com 13 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur Malpura, Anurag and Sandeep Lodha. According to the assessee, Anurag did not owe any amount to him, whereas Amit Sharma, Aashish Malpura, Anurag and Sandeep Lodha were to pay him the amounts disclosed by him in the said statement. From said particulars, including Mobile phone numbers, the Assessing Officer could take steps to join them in the inquiry by summoning directly or through the assessee. But, no such step appears to have been taken. Therefore, it is difficult to accept the general observation made by the Assessing Officer that identity of the persons advancing loans or accepting loans was not clear. No doubt, the assessee should have furnished relevant details of other persons, whose names were found recorded in the said material Exhibit-12, but, their details were not furnished. A perusal of answer to question no. 7 as available in the statement of the assessee recorded on 3.8.2017 i.e. during search proceedings, would reveal that he claimed to have maintained said account and recorded the interest received and paid by him. Once the assessee stated so, he was required to be further questioned as to who were the persons from whom, he had charged interest and as to who were the persons to whom he had Printed from counselvise.com 14 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur paid interest. However, no such enquiry appears to have been made by putting further specific questions in this regard. The department had no material to co-relate the entries recorded on the remaining pages of Exhibit 12 so as to establish that same pertained to cash loans and advances and to such and such person. 22. So far as allegation of suppression of the actual amounts of the transactions, as recorded in Exhibit-12, it appears that during post search enquiry, the assessee disclosed on 20.11.2017 that said amounts/figures were not the actual figures, as last two digits i.e. 2 ZEROs were intentionally omitted from being written therein. Ld. DR has not pointed as to what was the basis of question no. 9 put in this regard to the assessee while recording his statement during search proceedings. In other words, it remains unexplained as to how the Investigating Officer could imagine about falsehood of the figures, and concealment of last 2 ZEROs, when there was no such specific information available with the team. Printed from counselvise.com 15 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur Simply because the transactions related to small amount(s), it could not be inferred that the said amount(s) were not the true sums or figures or that two last digits were missing therefrom, same having been intentionally concealed/ suppressed, while writing the said figures on Exhibit-12. 23. It is true that according to the Assessing Officer, in his post search enquires statement, the assessee stated that the said transactions were of cash loans and advances and payments received, but when mobile phone numbers and addresses of only some of the persons, named above, were available and still they were not associated in the enquiry, and details of rest of the persons were not available on the incriminating material, or with the department, it cannot be said by any stretch of imagination that these transactions were unexplained cash credits in the hands of the assessee so as to attract the provisions of section 68 of the Act or to further arrive at the conclusion that the assessee earned interest of Rs. 1,37,000/- on the said amount(s) treated as unexplained cash credit. Conclusion 24. In view of the above discussions, we find merit in the contention raised by Ld. AR for the appellant that provisions of section 68 of the Act were not attracted for want of proper & detailed enquiry by the A.O., and Printed from counselvise.com 16 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur absence of cogent and convincing evidence to suggest that the assessee indulged in advancement of cash loans/advances from his personal income or money or that he claimed or actually/charged interest on any such amount. Consequently, the impugned order passed by Learned CIT(A) confirming the two additions made by the Assessing Officer cannot be sustained., for want of detailed enquiry and absence of cogent and convincing material on record. Result 25. As a result, this appeal deserves to be allowed. Same is hereby allowed. File be consigned to the record room after the needful is done by the office. Order pronounced in the open court on 08/10/2025. Sd/- Sd/- ¼xxu xks;y½ ¼ujsUnz dqekj½ (GAGAN GOYAL) (NARINDER KUMAR) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 08/10/2025 *Santosh Printed from counselvise.com 17 ITA No. 937/JPR/2025 Pradeep Jain, Jaipur vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Pradeep Jain, Jaipur. 2. izR;FkhZ@ The Respondent- DCIT, Central Circle-2, Jaipur. 3. vk;djvk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZQkbZy@ Guard File ITA No. 937/JPR/2025) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar Printed from counselvise.com "