ASSISTANT COMMISSIONER OF INCOME TAX (INT. TAX.), VADODARA vs. ROHIT PATEL, VADODARA

The present appeal preferred by the Revenue is directed against the ITA No.2647, 2648 & 2649/AHD/2025 (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) order dated 09/10/2025 passed by the Commissioner of Income Tax (Appeals)–13, Ahmedabad (hereinafter referred to as “CIT(A)” in short) under Section 250 of the Income Tax Act, 1961 ( hereinafter referred to as “the Act” in short) whereby the Learned CIT(A) deleted the additions made in the Assessment Order, dated 25/05/2023, passed under Section 143(3) read with Sections 153C and 144C(3) of the Act for the Assessment Year 2014-2015. Assessment Year 2014-2015

The Revenue has raised the following grounds of appeal: (ITA No.2647/AHD/2025) 1. “On the facts and circumstances of the case the Ld.CIT(A) has erred in deleting the addition of Rs.7,77,46,207/- without appreciating the fact that Assessee has failed to produce conclusive evidence in support of his contention that he has not given loan amounting U 12,00,000 to Avani D. Shah and Harsh D. Shah during the F.Y. 2013-14 relevant to A.Y.2014-15”

The Assessee has raised the following Cross Objections (CO/25/AHD/2026)

The Assessee, an individual and a non-resident, filed the original return of income for Assessment Year 2014-2015 on 27/01/2015 declaring total income of INR.7,04,480/- subsequently.

A search action under Section 132 of the Act was carried out on 23/01/2020 in the Avani Group of Vadodara and, during the course of search at the business premises of Shri Harsh Dipak Shah/Avani Petrochem Pvt. Ltd., certain incriminating documents and digital data (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) pertaining to or relating to the Assessee were found. in response to notice issued under Section 153C of the Act, the Assessee filed another return on 20/12/2021 declaring the same total income of INR.7,04,480/

On the basis of the said material proceedings under Section 153C were initiated for, inter alia, Assessment Year 2014-2015. On the basis of the seized material, the Assessing Officer formed the view during the assessment proceedings that the Assessee had advanced a loan aggregating U 12,00,000 to Ms. Avani D. Shah and Shri Harsh D. Shah during the Financial Year 2013 2014 relevant to Assessment Year 2014-2015 and accordingly treated the rupee equivalent of the said amount as unexplained money under Section 69A of the Act. The Assessing Officer quantified the alleged loan of U 12,00,000 at INR.7,32,68,860/- by applying exchange rates as per the seized material and, further, computed interest of INR.44,77,347/- at 12% per annum for the relevant periods, treating the same as undisclosed income from other sources in the hands of the Assessee. Thus, the Assessing Officer completed the assessment determining the total income of the Assessee at INR.7,84,50,687/-, making the following two additions, namely (i) addition of INR.7,32,68,860/- under Section 69A of the Act and (ii) addition of INR.44,77,347/- as undisclosed interest on the aforesaid amount.

Being aggrieved, the Assessee preferred appeal before the CIT(A).In appeal, the Assessee reiterated that he had no financial interest in Papenj LLC or S H Impex LLC, the entities involved in the alleged loan transactions. Further the Assessee was neither a shareholder nor a beneficial owner of either entity, and that he had not advanced any loan to the Avani Group; he requested that the matter be examined on the basis of the Foreign Tax & Tax Research report and confirmations obtained from foreign tax authorities. During the appellate proceedings, the CIT(A) called for comments from the Assessing Officer and obtained the Foreign Tax & Tax Research based information, including replies (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) from the United States tax authorities confirming that the Assessee was not associated or affiliated with Papenj LLC and was not a shareholder or beneficial owner of S H Impex Inc./LLC. The Foreign Tax & Tax Research material recorded that Papenj LLC had stated that the Assessee was not associated or affiliated with Papenj LLC and had never been a member or manager of that entity, and that Avani Shah, president of S H Impex Inc., confirmed that the Assessee was not a shareholder or beneficial owner of S H Impex LLC and that she was the 100% owner of S H Impex Inc. On careful consideration of the Assessee’s submissions, the seized email and the Foreign Tax & Tax Research confirmations, the Learned CIT(A) concluded that the loan, transaction was between Papenj LLC and S H Impex LLC/the Avani Group. Consequently, the CIT(A) directed deletion of the addition of INR.7,32,68,860/- made under Section 69A of the Act and, further, held that once the principal addition was deleted, there was no basis for charging notional interest of INR.44,77,347/- as undisclosed income from other sources, thereby deleting that addition as well.

Being aggrieved by the above relief granted by the CIT(A), the Revenue has preferred the present appeal before the Tribunal challenging the deletion of the total addition of INR.7,77,46,207/- (comprising INR.7,32,68,860/- and INR.44,77,347/-) on the grounds reproduced in paragraph 2 above.

The Learned Departmental Representative supported the assessment order and submitted that the email dated 14/03/2014 clearly referred to receipt of loans from the Assessee as ‘Rohit Uncle’ and that, in the absence of bank statements or other documentary evidence produced by the Assessee to show that he was not the lender, the CIT(A) erred in deleting the additions.

Per contra, the Learned Authorised Representative for the Assessee relied upon the detailed findings of the CIT(A) and theForeign Tax & Tax Research material, contending that there is no positive evidence to CO.25, 26 & 27/AHD/2026 (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) show that the Assessee advanced any loan, that the Assessee was neither a member nor a beneficial owner of Papenj LLC or S H ImpexLLC, and that the Assessee had acted merely as a facilitator. It was submitted that, the additionsmade by the Learned CIT(A) were rightly deleted.

We have given thoughtful consideration to the rival submissions. There is no dispute that the additions in question rest on the inference drawn by the Assessing Officer from the seized email communication and the alleged failure of the Assessee to produce bank statements.Whereas funds returned by the Learned CIT(A) and handed upon the Foreign Tax & Tax Research material which states that the Assessee has no ownership or beneficial interest in Papenj LLC or S H Impex LLC.

During the course of assessment proceedings, the Assessing Officer relied upon an email conversation, dated 14/03/2014, between Ms.Avani Shah and her father/brother, wherein it was stated that loans aggregating U .12,00,000 had been received, which included3 tranches stated to have been received from ‘Rohit Uncle Papenj, LLC’ on different dates. In the said email, reference was made to the first tranche of U .5,00,000 received on 10/07/2013, which was initially shown as a personal loan from ‘Rohit Uncle’ in the personal account, and to subsequent tranches of U .5,00,000/- and U .2,00,000/- routed through the business account of S H Impex Inc. in the United States.On the basis of the aforesaid email, the Assessing Officer concluded that the Assessee had advanced a loan of U 12,00,000/- to the Avani Group and that the rupee equivalent represented unexplained money of the Assessee. The Assessing Officer further held that, on such alleged loan, interest at 12% per annum had accrued during the Financial Year 2013-2014 and, in the absence of any explanation from the Assessee, treated INR.44,77,347/- as undisclosed income of the Assessee. We note that in response to the show-cause notice, the Assessee consistently contended that the loan was, in fact, advanced by Papenj LLC, a company based in the United States of CO.25, 26 & 27/AHD/2026 (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) America, (and not by him) and that he had acted merely as a facilitator between Papenj LLC and the Avani Group. The Assessee had explained that there was a longstanding relation with Papenj LLC and that the Avani Group had approached the Assessee for arranging funding; as the lender and borrower were not known to each other, he remained a medium of communication, but the funds originated from Papenj LLC and were directly routed to S H Impex Inc. or the personal account of Ms. Avani Shah in the United States. In support, the Assessee furnished, inter alia, the registration certificate of Papenj LLC, the operating agreement of Papenj LLC showing that its members were other individuals and not the Assessee, and correspondence indicating that the Assessee was neither a member nor a beneficial owner of Papenj LLC. The Assessing Officer, however, did not accept the above explanation offered by the Assessee and observing that no bank statements of Papenj LLC or of the Assessee had been produced to demonstrate that the Assessee had not given the loan and further taking the view that the reply of Papenj LLC furnished by the Assessee could not be relied upon unless received formally through Foreign Tax & Tax Research.

In the present case, the basis of conclusion drawn by the Assessing Officer was the email, dated 14/03/2014. The said email while referring to ‘Rohit Uncle’, also stated that the funds were loans from Papenj LLC. The emails also described how the aforesaid amounts were accounted for in the personal and business accounts of Ms. Avani Shah and S H Impex Inc. in the United States. In our view the language of the email supported the stand of the Assessee that Papenj LLC was the lending entity. The name of the Assessee had possibly appeared in the context of personal relationship and as a medium for arranging initial tranches of loan which were shown in the personal accounts before being reflected as a business loan from Papenj LLC. Our aforesaid view is supported by the confirmations obtained by the Foreign Tax & Tax Research from the United States tax authoritieswherein it was CO.25, 26 & 27/AHD/2026 (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) statedthat the Assessee was not a shareholder or beneficial owner of Papenj LLC or S H Impex Inc./LLC and that neither of the aforesaid entitieshad considered the Assessee as associated or affiliate. We are of the view that the Learned CIT(A) had rightly noted that, once it was established through Foreign Tax & Tax Research that the Assessee was neither a member nor a beneficial owner of Papenj LLC or S H Impex LLC and that the loan transactions, were between the saidforeign entities and the Avani Group, the inference that the Assessee advanced the loan in his personal capacity was notsustainable.In our view, the evidence available on record, read as a whole, supports the Asessee’s explanation that the Assessee merely acted only as a facilitator. We also find merit in the CIT(A)’s observation that the quantum of the alleged loan and the manner in which the foreign entities have treated the transactions in their own records indicatedthat the alleged loan belonged to Papenj LLC and not to the Assessee, and therefore cannot be assessed as unexplained money in the hands of the Assessee.

In view of the above, we concur with the Learned CIT(A) that in the facts and circumstances of the present case the addition of INR.7,32,68,860/- made under Section 69A of the Act in the hands of the Assessee is unsustainable and has been rightly deleted.

Once it is held that the Assessee is not the lender and that the principal amount of the alleged loan does not belong to him, the consequential addition of INR.44,77,347/- on account of interest credited or accrued on such loan cannot survive, as there is no underlying asset or transaction in the hands of the Assessee generating such income. Accordingly, we hold that the CIT(A) had correctly deleted the addition of INR.44,77,347/-.

In view of the above discussion, and on a holistic appreciation of the material, on record we hold that the CIT(A) was justified in deleting the additions of INR.7,32,68,860/- and INR.44,77,347/- and that the Revenue has failed to make out any case for interference with the order (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) passed by the Leaned CIT(A).

In view of the above, the Ground No.1 & 2raised by the Revenue in the present appeal are dismissed. Since we have dismissed the appeal of the Revenue, the Cross Objectionsraised by the Assessee are dismissed as having been rendered infructuous.

In result, for the Assessment Year 2014-2015 the appeal preferred by the Revenue stands dismissed. Consequently, the Cross-Objections raised by the Assessee for the Assessment Year 2014-2015 are dismissed.

Next we will take up appeal preferred by the Revenue and the Cross Objections raised by the Assessee for the Assessment Years 2019-2020 which arise from Order, dated 09/10/2025, passed by the Learned CIT(A) under Section 250 of the Tax Actwhereby the Learned CIT(A) had deleted the additions made in the Assessment Order, dated 25/05/2023, passed under Section 143(3) read with Sections 153C and 144C(3) of the Act for the Assessment Year 2019-2020. 20. The Revenue has raised the following grounds of appeal: (ITA No.2648/AHD/2025)

The Assessee has raised the following Cross ObjectionsCO/26/AHD/2026)

During the course of hearing both the sides had agreed that our finding/adjudication in ITA No.2647/AHD/2025 pertaining to the Assessment Year 2014-2015 shall apply mutatis mutandis to the present appeal for the Assessment Year 2019-2020. 23. Ground No.1 raised by the Revenue challenges the order passed by the Learned CIT(A) on the deleting the additions of INR.179,40930/- made by the Assessing Officer holding the same to be the undisclosed interest income computed at the rate of 12% on the outstanding loan of U 12,00,000 added in the hands of the Assessee under Section 69A of the Act in the assessment proceedings for the Assessment Year 2014- 2015 and the interest accrued there upon during subsequent financial year computed at the rate of 12%. We have confirmed the order passed by the Learned CIT(A) deleting the addition made by the Assessing Officer under Section 69A of the Act in respect of alleged loan of U .12,00,000 while adjudicating appeal for the Assessment Year 2014-2015. Therefore, the consequential addition of interest income in the hands of the Assessee for the Assessment Year 2019-2020 cannot be sustained.Therefore, we decline to interfere with the order passed by the Learned CIT(A) deleting the aforesaid addition. Accordingly, Ground No.1 raised by the Revenue is dismissed.

Since we have dismissed Ground No.1 raised by the Revenue, the correspondence Cross Objections No.1 raised by the Assessee is CO.25, 26 & 27/AHD/2026 (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) dismissed having been rendered infructuous.

As regards Ground No.2raised by the Revenue is concerned, we find that the Learned CIT(A) had deleted addition of INR.1,52,98,000/- observing as under: “8.5 I have carefully gone through grounds of appeal, statement of facts, assessment order, submissions made by the appellant, and judicial precedents relied upon. The addition of Rs.1,52,98,000/- has been made merely on the basis of certain loose papers seized from the premises of a third party, namely Avani Group. It is undisputed fact that the impugned loose papers were not found from the possession of the appellant nor are they in his handwriting. It is a settled position of law that the presumption under section 132(4A) or 292C of the Act can be invoked only in respect of documents found from the possession of appellant. Since, in the present case documents were found from the premises of another person, no presumption can be drawn against appellant. AO has failed to carry out any independent verification or inquiry to establish the connection between theappellant and the seized papers. There is no evidence on record to indicate that the handwriting on the loose sheets belongs to the appellant or any of his employees. No statement of the person from whose premises the papers were recovered has been brought on record to support the allegation. Further, there is no reference in the seized material to appellant's name, address, or any indication of his involvement in the alleged cash transactions. AO has also not examined the concerned Angadia firm or its records to substantiate the alleged transactions.

6 Further, the date mentioned on one of the loose papers is 31.12.2020, which clearly falls outside the previous year relevant to the assessment year 2019-20. Hence, the same cannot be relied upon for making an addition in this year. Moreover, two pages relied upon by AO appear to be written in different handwritings indicating that they were prepared by different individuals and cannot be treated as part of one continuous record.

7

We note that the above findings returned by the Learned CIT(A) relating to lack of inquiry by the Assessing Officer and the failure of the Assessing Officer to establish nexus between the Assessee and the material seized are contrary to the material on record. In this regard, we note that the Assessing Officer has, after examining search material, specifically recorded as under:

The Assessee has raised the following Cross Objections (CO/27/AHD/2026)

The solitary ground raised in the present appeal is identical to Ground No.1 raised by the Revenue in appeal for the Assessment Year 2019- 2020. We have dismissed the corresponding ground raised by the Revenue in the said appeal for the Assessment Year 2019-2020 and have deleted the addition made in the hands of the Assessee on account of undisclosed interest income computed at the rate of 12% on the outstanding loan of U 12,00,000 added in the hands of the Assessee under Section 69A of the Act in the assessment proceedings for the Assessment Year 2014-2015 and the interest accrued there upon during subsequent financial year computed at the rate of 12%. We have confirmed the order passed by the Learned CIT(A) deleting the addition made by the Assessing Officer under Section 69A of the Act in respect of alleged loan of U .12,00,000 while adjudicating appeal for the Assessment Year 2014-2015 and have confirmed the order passed by the Learned CIT(A) deleting the consequential addition of CO.25, 26 & 27/AHD/2026 (Assessment Year: 2014-2015, 2019-2020 & 2020-2021) interest income in the hands of the Assessee for the Assessment Year 2019-2020. Adopting the same reasoning we decline to interfere with the order passed by the Learned CIT(A) deleting the addition of interest income of INR.2,01,08,172/-in the hands of the Assessee for the Assessment Year 2020-2021.Accordingly, Ground No.1 raised by the Revenue is dismissed. Since we have dismissed Ground No.1 raised by the Revenue, the correspondence Cross Objections No.1 raised by the Assessee is dismissed as having been rendered infructuous.

In result, appeal preferred by the Revenue and the Cross Objection filed by the Assessee for the Assessment Year 2020-2021 are dismissed.

In conclusion: Assessment Year 2014-2015 (a) ITA No.2647/AHD/2025 is dismissed. (b) CO No.25/AHD/2026 is dismissed. Assessment Year 2019-2020 (c) ITA No.2648/AHD/2025 is partly allowed. (d) CO No.26/AHD/2026 is partly allowed Assessment Year 2020-2021 (e) ITA No.2649/AHD/2025 is dismissed. (f) CO. No.27/AHD/2026 is dismissed. Order pronounced on 22.07.2026 (Dr. B.R.R. Kumar) Judicial Member

""यथ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) / The CIT(A) 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड"फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.