AMAL ATULKUMAR JAIN,MUMBAI vs. ACIT, CENTRAL CIRCLE 8(4), MUMBAI

The brief facts of the case are that the assessee is an individual engaged, inter alia, in the business of trading in agricultural produce and also derives share of profit from partnership firms and interest income. The assessee filed his return of income for A.Y. 2021–22 on 23.12.2021 declaring total income of Rs.14,93,640/-. A search and seizure action under section 132 of the Act was conducted in the Sawai Fragrances Group on 31.12.2021, covering the residential premises of the assessee. Thereafter, the case was selected for scrutiny and the assessment was completed under section 143(3) of the Act on 27.12.2022 at a total income of Rs.16,42,440/-.

During the course of search, certain invoices relating to expenditure incurred on vehicles were found from the residential premises of the assessee. In his statement recorded under section 132(4) of the Act, the assessee admitted that cash expenditure aggregating to Rs.1,12,245/- had been incurred on 30.11.2020 in respect of vehicles belonging to M/s. Pragati Aroma Oil Distillers Pvt. Ltd. (“PAOD”). The Ld. AO observed that the assessee had failed to satisfactorily explain the source of the cash utilised for meeting the said expenditure and, accordingly, treated the amount of Rs.1,12,245/- as unexplained expenditure under section 69C of the Act.

The Ld. AO had also made a disallowance of Rs.36,547/- under section 14A read with Rule 8D. In appeal, the Ld. CIT(A) deleted the said disallowance after recording that the assessee possessed sufficient own and interest-free funds. However, the addition of Rs.1,12,245/- under section 69C was sustained on the ground that the assessee had not furnished credible and verifiable evidence establishing the specific source of the cash expenditure. 2 Consequently, the appeal before the Ld. CIT(A) was partly allowed. The assessee is now in appeal before the Tribunal only against the addition of Rs.1,12,245/- under section 69C. The grounds specifically challenge the addition as unexplained expenditure and further contend that the expenditure had never been claimed in the books of account.

The Ld. AR submitted that the authorities below were not justified in sustaining the addition of Rs.1,12,245/- under section 69C of the Act. It was contended that the assessee had duly explained during the assessment proceedings that the cash expenditure was met out of available cash balances and withdrawals made by various family members from time to time. The assessee had also furnished a cash ledger in support of his explanation.

The Ld. AR further submitted that the expenditure in question related to vehicles belonging to M/s. Pragati Aroma Oil Distillers Pvt. Ltd., one of the group companies. It was specifically contended that the said expenditure had not been recorded or claimed as expenditure in the books of PAOD. Therefore, according to the Ld. AR, there was no occasion to make any disallowance in respect of an expenditure which had not been claimed in the books of account.

The Ld. AR accordingly submitted that the explanation furnished by the assessee regarding the source and nature of the expenditure ought to have been considered in its proper perspective and prayed that the addition of Rs.1,12,245/- sustained by the Ld. CIT(A) be deleted.

Per contra, the Ld. DR relied upon the orders of the authorities below. The Ld. DR submitted that the invoices relating to the vehicle expenditure were found during the course of search from the residential premises of the assessee and that, in the statement recorded under section 132(4) of the Act, the assessee had admitted having made the cash payments towards such vehicle expenses. The expenditure of Rs.1,12,245/- specifically pertained to F.Y. 2020– 21 relevant to the assessment year under consideration.

The Ld. DR further contended that the principal issue under section 69C is the explanation regarding the source of the expenditure. The Ld. AO had recorded that the assessee failed to produce documentary evidence substantiating the claim that the expenditure was met out of withdrawals or cash balances of different family members. The Ld. CIT(A) had independently considered the explanation and found that no specific and verifiable source of the cash expenditure of Rs.1,12,245/- had been demonstrated.

The Ld. DR, therefore, submitted that merely stating that the expenditure had not been claimed in the books of PAOD would not, by itself, explain the source from which the cash payment was actually made. Accordingly, the Ld. DR prayed for sustaining the impugned addition.

We have heard the rival submissions and perused the material available on record. The dispute before us is confined to the addition of Rs.1,12,245/- under section 69C of the Act in respect of cash expenditure incurred on vehicles belonging to M/s. Pragati Aroma Oil Distillers Pvt. Ltd. During the search proceedings, the assessee admitted the fact of payment of the said vehicle expenses in cash. The Ld. AO treated the amount as unexplained expenditure on the ground that the assessee failed to satisfactorily substantiate the source thereof.

Before the revenue authorities, the assessee explained that the impugned expenditure was met out of the available cash balances and withdrawals made by various family members from time to time. The assessee also relied upon the cash ledger in support of the source of such expenditure. It was further contended that the expenditure pertained to vehicles belonging to M/s. Pragati Aroma Oil Distillers Pvt. Ltd. and that the said expenditure had not been recorded or claimed in the books of the said company. The Ld. CIT(A), however, sustained the addition observing that the explanation regarding the source of the cash expenditure was general in nature and was not supported by credible and verifiable documentary evidence.

Considering the peculiar facts and circumstances of the case, we are of the considered view that the issue requires fresh verification at the end of the Ld. AO, particularly with regard to the source of the cash expenditure of Rs.1,12,245/-, the availability of cash balances/withdrawals of the concerned family members, and the assessee's contention regarding the ownership of the vehicles and treatment of the expenditure in the books of M/s. Pragati Aroma Oil Distillers Pvt. Ltd. Accordingly, we set aside the impugned finding of the Ld. CIT(A) on this issue and restore the matter to the file of the Ld. AO for fresh adjudication in accordance with law after verification of the relevant documentary evidence. The assessee is directed to furnish all necessary evidence in support of his claim and cooperate with the assessment proceedings. Needless to say, the Ld. AO shall afford reasonable opportunity of being heard to the assessee before deciding the issue. We have not expressed any view on the merits of the addition.

Accordingly, Ground Nos. 1 and 2 raised by the assessee are allowed for statistical purposes.

In the result, the appeal of the assessee bearing ITA No. 6747/Mum/2026.is allowed for statistical purposes. Order pronounced in the open court on 03rd day of September 2026 Sd/- Sd/- (OM PRAKASH KANT) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 03/09/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI