MOHANLAL KANAYALAL PAHUJA,MUMBAI vs. DCIT-CC 5(2), MUMBAI

आदेश / ORDER PER SANDEEP GOSAIN, JM: These cross appeals filed by assessee as well as by revenue are directed against the order dated 15.09.2025 passed u/s 250 of the Income Tax Act, 1961 ('the Act'), by the CIT(A) for the assessment year 2023-24, raising following grounds;-

i. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O. in relying on the statements of employees/promoters of the appellant group during the course of search action, despite the fact that such statements were subsequently retracted, for reasons stated in the impugned order or otherwise. ii. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O. in relying on the statements of third parties recorded during the course of search action, despite the fact that such statements were subsequently retracted, for reasons stated in the impugned order or otherwise. iii. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of ld. A.O. in relying on contents of certain tally data which was found and seized from the premises of a third party, for reasons stated in the impugned order or otherwise. iv. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O. in holding that the appellant has made unaccounted cash sales of Rs.5.87 Crs. in the absence of any incriminating material found during the course of search, for reasons stated in the impugned order or otherwise. v. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O.

3 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) in arriving at a figure of Rs.5.87 Crs. being unaccounted cash sales made by the appellant which is incorrect and liable to be reduced, for reasons stated in the impugned order or otherwise. vi. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in restricting the addition made by the Id. A.O. on account of alleged unaccounted cash sales made by the appellant by applying a gross profit rate of 1.72% amounting to Rs.10,09,418/-, for the reasons stated in the impugned order or otherwise. vii. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O. in making an addition of gross profit @1.72% on the alleged unaccounted cash sales made by the appellant, for the reasons stated in the impugned order or otherwise. The Appellant submits that the aforesaid gross profit rate as computed by the Id. AO being excessive on facts and prays that the same be suitably reduced. Addition of interest paid on cash loan from Shri Banpreet Atal and Shri Surinder Singh Atal viii. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of ld. A.O. in relying on the statement of the appellant as well as third persons despite the fact such statements were subsequently retracted, for the reasons stated in the impugned order or otherwise. ix. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of ld. A.O. in holding that transactions found recorded in tally data 'KA" belongs to the appellant, for the reasons stated in the impugned order or otherwise. x. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of Id. A.O. in holding that appellant has under taken transactions in cash with Shri Banpreet Atal and Shri Surinder Singh Atal, for the reasons stated in the impugned order or otherwise.

4 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) xi. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O. in alleging that appellant has paid interest on cash loan to Shri Banpreet Atal and Shri Surinder Singh Atal, for the reasons stated in the impugned order or otherwise. xii. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O. is making the addition of Rs. 47,30,000/-u/s 69C of the Act on account of alleged interest paid on cash loan, for the reasons stated in the impugned order or otherwise. Addition of interest received on cash loan to Shri Ranjit Laddha

xiii. On the facts and circumstances of the Appellant's case and in law, the ld. CIT(A) erred in confirming the action of ld. A.O. in relying on the statement of the appellant as well as third persons despite the fact such statements were subsequently retracted, for the reasons stated in the impugned order or otherwise. xiv. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O. in holding that transactions found recorded in tally data 'KA" belongs to the appellant, for the reasons stated in the impugned order or otherwise. xv. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of ld. A.O. in holding that appellant has under taken transactions in cash with Shri Ranjit Laddha, for the reasons stated in the impugned order or otherwise. xvi. On the facts and circumstances of the Appellant's case and in law, the Learned Assessing Officer erred in alleging that the appellant has received interest on cash loan given to Shri Ranjit Laddha, for the reasons stated in the impugned order or otherwise. xvii. On the facts and circumstances of the Appellant's case and in law, the Id. CIT(A) erred in confirming the action of Id. A.O. in making the addition of Rs. 68,05,223/-on account of

5 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) alleged interest received on cash loan, for the reasons stated in the impugned order or otherwise. xviii. The Appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing. 2. Ground No. 1 to 7 raised by the assessee are related and inter-connected and relates to challenging the order of Ld. CIT(A) in upholding the additions on account of gross profit earned by the assesse on account of alleged unaccounted cash sales, therefore, we have decided to adjudicate these grounds through the present consolidated order. 3. We have heard the Ld. Counsel for both the parties and perused the material on record, judgment cited before us and also the orders passed by the Revenue Authorities. 4. From the records, we noticed that a search action under Section 162 of the Act was conducted in the case of assessee group and related entities. However, during the search, the Department examined digital records, statements of key persons and other materials to investigate alleged unaccounted business activities carried out by the group. 5. The Assessing Officer observed that a parallel Tally data identified as “KA” was found during the search from the possession of three persons. Thus, on investigation, it

6 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) was found that the said data belonged to the assessee and its groups and the same was handed over by the assessee to third party. In this regard, the statement of authorities as well as the assessee was recorded during the course of search. The AO was further of the view that the assessee’s promoter have accepted in their statement that the said tally data was handed over by them to such persons and the same belonged to the assessee group. Accordingly, based on these submissions, data which contained details of cash trading sales and cash payments relating to such transactions that were not recorded in the regular books of assessee. Thus, while relying on the said statement recorded from the promoter, partner and employees of the group, concluded that the assessee group was engaged in large scale unaccounted trading of electrical goods through cash transactions outside the books of account. 6. In order to reach this conclusion, the Assessing Officer further noticed that Shri Vijay Pahuja in his statement recorded during the search specifically stated that the tally data “Ka” has been named after Kalpesh, the accountant who records those entries in tally. Further, the AO while making reference to the statement of Shri Vijay Pahuja also stated that the details regarding all the unaccounted cash transactions were maintained in a separate tally in HP laptop in an encrypted form using a software namely ‘Cell

7 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) out’ (also known as Mr. India). He further pointed out that Shri Kalpesh Kumbhar and Shri Vijay Pahuja used to make entries in the tally data. 7. Thus, the Assessing Officer based on the statement of Shri Vijay Pahuja stated that the data was maintained in a coded form in the Tally. The actual amount was suppressed by two digits, similarly, the actual financial year is ascertained by adding 11 years to the year mentioned in the Tally data. Further, the AO also pointed out that Shri Vijay Pahuja in his statement recorded, has given explanation/full form of the code words/abbreviations mentioned in the tally data. We also noticed that based on the statement of Shir Vijay Pahuja, AO stated that the tally data primarily contains the transactions related to unaccounted sale of products to wholesalers and retailers in cash, cash exchanged with parties in lieu of non-genuine sale and purchase entries and unaccounted cash loans given to parties. The AO also referred to WhatsApp conversations, ledger extracts from the Tally data, and other seized documents. According to him, these records corroborated the existence of unaccounted cash sales and purchases undertaken by the assessee group.

8 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) appearing in the said data during the course of search proceedings. Thus, on the basis of the seized material and statements, it was concluded by the AO that the assessee group had carried out unaccounted cash sales amounting to Rs. 1,630.62/- crore during the period from F.Y. 2013-14 to F.Y. 2023-24. From the records, we noticed that AO alleged that an amount of Rs. 980.15/- Crores recorded under the ledgers namely 'Shankarbhai', 'Shankarbhai l', 'Shankarbhai 2' and 'CKP' reflected payment made to M/s. Polycab India Ltd. and its representative for purchases. The AO further mentions that sales aggregating to approximately Rs.569.21/- crore recorded in the regular books of account of the assessee and its group concerns were not genuine. According to him, such sales were used to introduce cash generated from unaccounted transactions into the regular books. The AO was of the view that the cash generated from sales made outside the books was subsequently brought into the books through accommodation or non-genuine sales and prices without actual movement or delivery of goods and in this regard, reference was made to the statement of employees Shri Jaydeep Mahajani that the stock shown in the books are fictitious.

9 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) (subsequently converted into S P Electro Solutions Pvt. Ltd.), M/s. L N Enterprises, and M/s. Hans Wires & Cables (Prop. Mohanlal Pahuja). The allocation was made in proportion to the alleged bogus sales recorded in the regular books of these entities. The working of the same is at page nos. 197-198 of the assessment order. 10. It is important to mention here that against the above sales on consolidated basis, AO considered cash payments of Rs.980.15/- crore allegedly made to representatives of Polycab India Limited for purchase of goods, as a deduction. Further, AO also considered payments of Rs. 569.21/- crore alleged to have been made against cheque entries recorded in the books, as a deduction and considered various expenses reflected in the seized records, subject to certain adjustments, amounting to Rs. 43.66/- Crores. Therefore, after considering the above figures, the AO worked out the total profit from the alleged unaccounted business at Rs. 37.58/- Crore and determined the profit margin at 2.30% for the entire group. The said profit margin was applied to the proportionate sales computed in each entity and each assessment year. In the case of the assessee, alleged unaccounted cash sales of Rs. 5,87,29,067/- were attributed for AY 2023-24 and profit was estimated at 2.30%, resulting in an addition of Rs. 13,50,769/-, which forms the subject matter of the present appeal. The working of the same is at page nos. 316-317 of the assessment order.

10 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja)

11 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja)  Nikhil wedding expenses were rightly treated as personal expenses and remained disallowed. while granting relief in respect of Haryana expenses and general expenses, the Id. CIT(A) confirmed the core findings of the AO regarding the existence of unaccounted purchases, cash sales and accommodation entries and therefore sustained the addition, subject to the aforesaid modifications, thus the appeal was partly allowed. After having heard Ld. Counsels for both the parties at length, we found that the assessee challenged the authenticity of tally data which was found from the premises of third party during the search action and whether the same can be relied upon to make the addition in assessee’s case.

12 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) remains as to whether the addition can be made based on the tally data which is not reliable and authentic.

13 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) accountant with the appellant. In this regard, it was submitted that Id. AO had attempted to link the transaction on sample instances and extrapolated such findings on the entire data. He has failed to establish the same in entirety. Moreover, the concerned person has clarified in his retraction affidavits that such data was not maintained by him and such chats were related with regular business discussions Thus regarding quantity, pricing, stock and collections. Thus, in absence of corroborative evidence, WhatsApp messages cannot be treated as conclusive proof of undisclosed income. We also noticed that AO has also relied upon certain loose papers and has attempted to link the same with the entries appearing in the Tally data. The said attempt made by the AO is arbitrary and unsupported by any independent material. Ordinarily business references and market purchases have been incorrectly linked to alleged unaccounted transactions.

14 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) available at Vasai Godown. Moreover, the statement of Shri Vishwas Sahane was recorded during the search, wherein he clearly stated that Wire stock was duly kept at Vasai Godown. Therefore, the reliance placed on the statement of Shri Jaydeep Mahajani is misplaced.

15 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) entities proportionately based on the turnover. With respect to the allegation of the payment of Rs. 980.15 crores alleged to be paid to M/s. Polycab India Ltd., we notice that the same was duly explained before Id. AO as well as Id. CIT(A) that the said payment was not paid to M/s. Polycab India Ltd. Instead, the purchase in cash has been made from third party and the same has no relation with M/s. Polycab India Ltd. In the appellate order, Id. CIT(A) has accepted the above argument of the appellant and has held in para 10.21 (page no. 328) that the payment of Rs. 980.15 Crores doesn't pertain to M/s. Polycab India Ltd. and instead the same has been paid to third party. No dispute on this decision has been raised by the department in the impugned appeal.

16 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) mention that apart from the statements, no documentary evidences or findings have been bought on record by the search officials or the id. AO to show that the sales are non-genuine. The said finding is not based on the seized tally data. It is submitted that neither the search officials nor the Id. AO has made any inquiry from the sales parties to show that no goods were received by them. Therefore, in the absence of such inquiry, the findings given by the Id. AO based on the retracted statement is incorrect. In our view, the only basis of identifying such non-genuine sales in the regular books of accounts is the use of code words "=", "Neel" and "Rupesh Bhai". It was alleged that the sales made with these code words are non-genuine. In this regard, it is submitted these are normal code words used by the appellant in the ordinary course of business to identify the sales executive. It is submitted that the appellant has more than 50 sales personals and to effectively monitor the sales made by each of the sales executive, the sales are recorded under each sales personal separately using such codes. It is submitted that the appellant group has a policy that whenever there is sale, it needs to be mapped with salesman.

17 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) through various sales persons. On perusal of the above, that the assessee is in the common practice of recording the sales in the name in sales executive. Further during the course of assessment proceedings, it was explained before the Id. AO that code "=", is used when the sales is made directly by the Management team accordingly there is no name of specific person but this code word was used instead. Similarly, the code 'Neel' and 'Rupesh Bhai' refer to the sales made by the promotors being Neel Pahuja and Rupesh was Dhirwani. Accordingly, it was submitted that the use of code words for mapping the sales should not be inferred as non- genuine sales. In the assessment order, AO has failed to bring on record any evidence to support the above allegation of the bogus sales. He has, failed to show as to whether the sales made by the appellant in the books of accounts are also reflected in the tally accounts. As per the allegation of AO, the actual sales are made by the assessee in cash and to compensate the same, the appellant makes non genuine sales in the books to clear the stock in the books and bring the unaccounted cash in regular books of accounts. 20. In this regard, the assessee submitted that the ledger account of a sales party alleged to be bogus on the basis of codes mentioned in the books of accounts and sales register of tally data KA for the same period at page nos. 187-201 of the paper book. we Notice On perusal of the same, we notice that the sales reflected in the books of accounts and tally data are different in every form

18 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) and manner. This clearly goes to show that the sales made in the books of accounts are not related to the transaction mentioned in the tally data. AO has failed to establish any cash trail to prove the above allegation. He has further failed to show as to how the cash is transferred to the concerned parties and through whom such cash is transferred. Moreover, on perusal of the break-up of the alleged bogus sales in the books of accounts with codes '=', 'Neel' and 'Rupesh Bhai', we noticed that the same also includes sales made through ecommerce site such as Amazon and Tata Cliq wherein the sale consideration is received through banking channels after due collection of the material by the personnel of such ecommerce website. Further, the said break up also includes sales made in cash wherein cash received in accounted in books after delivery of material in retail. The break-up of party wise sales as per books is enclosed herewith at page nos. & 202-225 of the paper book. This shows that are the allegation made by the AO are not correct. 21. We also noticed that the statement of Shri Vijay Pahuja, Shri Kalpesh Kumbhar and Shri Jaydeep Mahajani, which has also been reproduced by the Id. AO in the impugned order passed, it is apparent that these statements are verbatim. On perusal of the above, your honour would observe that the all these persons have given their replies in identical manner, which again raise serious doubt on the sanctity of the statements. Accordingly, the reliance placed by the Id. AO on such statement is unfounded. Further, on

19 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) perusal of the assessment order of various other entities of the appellant Notice group, it is observed that as per AO, appellant has made non-genuine sales to its other group entities also. In this regard, it is submitted that such contention of Id. AO makes the entire allegation or so-called theory of the Id. AO of routing the unaccounted cash in the books of accounts goes for a toss. It appears that the. AO has deliberate failed to understand that the making the non-genuine sales within the group entities would cannot suffice the purpose of routing the unaccounted cash sales in the books of accounts. Moreover, why would appellant sell the goods to its sister concern on profits. Accordingly, it is submitted that the entire allegation of the Id. AO is merely based on whims and fancies. During the course of assessment proceedings in order to prove the genuineness of the sales transactions, the appellant has duly filed the relevant details such as sales invoice, bank statements, ledger accounts etc. No doubt has been raised by the AO on such details; however, all these details have been ignored by the AO while passing the impugned assessment order.

20 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) apart from allowing the purchase cost of Rs. 980.15 Crores and 569.62 Crores, td. AO had also noted that the expenses debited in the seized tally data 'Ka' amounting to Rs. 54.64 Crs. Out of the same, AO allowed expenses amounting to Rs. 43.66 Crs. With respect to the expenses not considered by the AO, an amount of Rs. 1,42,54,400/- was recorded as 'Nikhil Wedding Expenses', whereas an amount of Rs. 5,06,09,864/- was recorded as Haryana Expenses, thus aggregating to Rs. 6,48,64,264/-. Further, an amount of Rs. 4,48,74,686/- (20% of Rs.22,43,73,434/-) was disallowed on ad-hoc basis of general expenses. The working of the same is given at page no. 316-317 of the assessment order.

21 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) when viewed in the context of the volume of sales transactions recorded in the Tally data and ought to have been duly considered while determining the profit margin. We also notice that it is submitted that incurrence of bad debts is an inherent and normal feature of any trading business. Considering the magnitude of the alleged unaccounted cash sales attributed to the appellant group, it is reasonable and commercially prudent to recognize that a certain portion of such sales would inevitably become irrecoverable and result in bad debts. The Tally data 'Ka' seized during the course of search, which has been heavily relied upon by the Id. AO, reflects Bad Debts aggregating to Rs. 20.71 crores under the head 'debtors'. The copy of the said extract of the tally data 'Ka' is placed at page nos. 226-241 of the paper book.

22 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) under the head bad debts in the debtors head itself. The said intent of the maker of the tally data, show that the said sales amount from the concerned debtors is not realisable. Accordingly, the same needs to be allowed as a deduction from the total sales adopted by the AO. 25. It is also important to mention that the seized material in the form of tally data, needs to be seen in its entirety. When particular entries made by the owner of the tally data, show the debtors to whom sales were made, are bad in nature and not realisable, the same are to be considered as correct. It cannot be a case that part of the tally data wherein the sales are recorded are considered as correct by the department whereas the corresponding classification in debtors are not considered. We further noticed that out of the total bad debts of Rs. 20.71 crores, an amount of Rs. 19.03 crores pertains to the sales transactions relating to the period under consideration. The working of the same is placed at page nos. 226 of the paper book. Despite the same being duly recorded in the Tally data, AO has failed to consider these bad debts while computing the profit margin. It is submitted that the business of unaccounted cash trading would also involve instances where customers fail to discharge their payment obligations, resulting in bad debts. Therefore, while estimating profits from such transactions, due allowance must necessarily be granted in respect of such irrecoverable amounts. Since the AO had accepted and allowed the claim of bad debts only in respect of

23 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) those amounts which were routed through the Profit & Loss Account. However, merely because the remaining bad debts were not appropriately classified and were reflected under the head of sundry debtors in the Tally data, the same cannot be Thus, when disregarded. Thus when once AO has accepted the principle that bad debts constitute a legitimate business deduction, there is no justification for disallowing the remaining bad debts which are equally evidenced from the seized tally data and pertain to the same business activities. 26. Therefore, considering the totality of the facts and circumstances as discussed above, the bad debts aggregating to Rs. 19.03 Crores pertaining to the relevant period deserves to be considered while computing the profit margin and determined in the income of the assessee. Thus, considering the above observation arising out of total sales amount, it reduced to the extent of Rs. 19.03 Crores.

24 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) and also the orders passed by the Revenue Authorities. From the records, we noticed that the Department in its grounds of appeal have challenged the action of Ld. CIT(A) to delete the disallowance of Haryana Expenses & Nikhil Wedding Expenses aggregating to Rs. 3,60,01,938/-. At the very outset, we noticed that Ld. AR pointed out that the grounds raised by the Department is factually incorrect as the total additions made by the AO during the year under consideration was only Rs. 13,50,769/-, relates to A.Y. 2023-24. Since the Ld. CIT(A) in its order has held that Haryana Expenses relates to the business of the assessee, the same was allowable, thus considering the factual position, Ld. CIT(A) had confirmed the disallowance to the extent of Rs. 1,42,54,400/- being Nikhil Wedding Expenses, while balance amount pertaining to Haryana Expenses amounting to Rs. 5,06,09,864/- was allowed as relief to the assessee. 29. We have noticed that the AO while computing the gross profit for the SP group as a whole had made the said disallowance. The assessee is one of the part of the said group. It was submitted that relief allowed by the Id. CIT(A) amounting to Rs.5,06,09,864/- is for the entire Group for all the assessment year from AY 2013- 14 to 2023-24 and not specifically for the assessee for AY 2023-24. It is pointed out that amount of such relief attributable to the assessee for AY 2023-24 is Rs. 3,93,485/-. The same is apparent

25 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) from the order passed by AO giving effect to the order of Ld. CIT(A). Since it is submitted that the quantum of addition disputed by the department in the said appeal is incorrect. At the most, the correct amount of relief allowed by Id. CIT(A) stands at Rs. 3,93,485/-. Thus, the resulting tax effect of this amount is below the limit prescribed for filling of appeal by the revenue before ITAT. Accordingly, considering the delay of the facts and circumstances as discussed above and after hearing the parties, we are of the view that the appeal of the revenue stands dismissed on account of low tax effect.

26 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) eventually in these ledger are recorded in code manner, the entries were decoded by adding eleven years to the year mentioned in the ledger and multiplying the recorded figures by one hundred to arrive at the actual value of transactions. The AO noted that the Tally data contained ledger accounts maintained in the names "Bobby-Cash1", "Bunny Seth", "Tegh Cable-SB2" and "Surinder Singh". According to the AO, the ledgers in the names "Bobby- Cash1", "Bunny Seth" and "Tegh Cable-SB2" pertained to Shri Banpreet Atal, whereas the ledger in the name of "Surinder Singh" pertained to Shri Surinder Singh Atal.

27 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) undertaken by the appellant with Shri Surinder Singh Atal. The AO observed that the ledgers contained various debit and credit entries along with separate entries relating to payment and receipt of interest. According to the AO, the presence of interest entries established a lender-borrower relationship between the parties and demonstrated that the transactions were in the nature of cash loans. 33. The AO prepared a year-wise analysis of the entries recorded in the ledgers and held that cash loans had been received by Shri Mohanlal Pahuja to Shri Surinder Singh Atal over the relevant assessment years. Based on the interest entries appearing in the ledgers, the AO worked out the year-wise interest allegedly paid by the appellant aggregating to Rs. Rs. 1,32,18,125/- out of which interest amounting to Rs. 47,30,000/- pertains to AY 2023-24. The AO held that the aforesaid interest represented expenditure incurred outside the regular books of account on unaccounted cash loans. Accordingly, the same was treated as unexplained expenditure under section 69C of the Act and additions were made in the respective assessment years.

28 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) authenticity of the transactions recorded therein could not be doubted and observed that the ledger account titled "Surinder Singh" reflected various cash transactions and interest entries and, therefore, accepted the AO's conclusion that the ledger represented unaccounted cash loan transactions with Shri Surinder Singh Atal. Further, the retraction filed by Shri Banpreet Atal was not accepted on the ground that the seized Tally data itself established the genuineness of the transactions and further, the contention that the ledger pertained to trading activities already forming part of the alleged unaccounted turnover was rejected. The Id. CIT(A) further held that the presence of interest entries in the ledger supported the AO's view that interest expenditure had been incurred on such cash loan transactions. Accordingly, the addition was sustained as unexplained expenditure u/s 69C. The alternative plea for telescoping was also rejected on the ground that the appellant had denied entering into cash loan transactions and, therefore, could not simultaneously seek telescoping of the alleged interest expenditure. Consequently, the ground of appeal was dismissed.

29 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) statement of Shri Banpreet Atal which is placed at page nos. 340 of the assessment order, refers to other ledgers and not ledger 'Surinder Singh'. Therefore, reliance on such statement to hold that the said ledger contains loans entries, is also incorrect. 91. Moreover, it is submitted that no statement recorded of Shri Surinder Singh has been bought on record as to whether he has been examined with respect to the said seized ledger account. In addition to the above, it is further submitted that no statement directly admitting any loan transaction with the appellant has been brought on record by the AO. Thus, once the very foundation of the addition stood retracted, no adverse inference could have been drawn against the appellant solely on the basis of such statement. Accordingly, it is submitted that the said ledger cannot contain to hold that the same is related to loan transaction. Further, as already discussed above, the tally data relied upon by the AO was seized from the premises of a third party and suffers from serious defects and inconsistencies and therefore, no addition could be made based on such tally data. Therefore, we direct the AO to delete the said additions.

30 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) 37. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

31 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) transactions. According to the AO, the statement established that the transactions recorded in the ledgers were not ordinary business transactions but were unaccounted cash loans carrying interest.

32 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) 40. Although the said additions were challenged before Ld. CIT(A), who had also dismissed the appeal of the assessee and uphold the additions.

33 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) incorrect and such were never stated by the appellant. This clearly means that AO's allegation that Ranjit Seth means Ranjit Laddha is incorrect. There is no other document which shows that Shri Ranjit Seth relates to Shri Ranjit Laddha, which was found from the search action from the appellant. The relevant portion of the affidavit reads as under:-

34 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) Similarly, the statement of Shri Vijay Pahuja has also been 43. retracted by him. Thus, it is important note that as already discussed in earlier paras, Id. CIT(A) has duly accepted that the abbreviations such as 'Shankarbhai' which was earlier stated by the appellant in his statement to be pertaining to M/s. Polycab India Ltd., was incorrect and no dispute has been raised by the department to this effect before your Honours. On similar grounds, it is submitted that the statement of the appellant cannot be accepted in relation to Shri Ranjit Laddha, in the absence of any correlation.

35 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) Ans: Sir, I do not recollect exact details. But approximately in a year overall we have cash loans of around Rs 7 to 8 Crores. At a single time roughly we have cash loan of maximum of Rs 25 lakhs. I do not keep any records of such loans. In fact, since last 2 years I have stopped any such transactions with Mr. Mohanlal Pahuja. However, these were not the answer which I had spoken during the statement on oath, I had clearly mentioned the officer that there were no cash purchase and sale of copper wires to locals, also there are no such cash loan transactions between me & Mr. Mohanlal Pahuja. Even the above stated amount of cash loans is false and no such interest income was earned. Further, no evidences were confronted which shows that I had done any cash transactions as mentioned above. This is written by the officer on his own.

36 ITA Nos.8181 & 8180/Mum/2025 (Mohanlal Kanayalal Pahuja) entered into cash transaction with Shri Ranjit Laddha, therefore, application made by the AO in respect of the interest is directed to be deleted.

Order pronounced in the open court on 17.08.2026

Sd/- Sd/- (BIJAYANANDA PRUSETH) (SANDEEP GOSAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 17/08/2026 Z.U., PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलार्थी / The Assessee 1. 2. प्रत्यर्थी / The Respondent. संबंधित आयकर आयुक्त / The CIT(A) 3. 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण,मुम्बई/ DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6.

आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy//

उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai