SHYAM GOPALDAS AHUJA,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX - CIRCLE 22(1), MUMBAI

Since all the issues involved in these appeals are common and identical and belong to the same assessee, hence, they have been clubbed, heard together, and a consolidated order is being passed for the sake of convenience and brevity. Firstly, we shall take ITA 2478/MUM/2026 for A.Y. 2009-10 as the lead case, and the facts narrated therein are being considered. The assessee has raised the following grounds of appeal:

On the contrary, the Ld. DR appearing on behalf of the Department relied upon the orders passed by the Revenue Authorities.

We have heard the counsels for both the parties, perused the material placed on record and also the orders passed by the Revenue Authorities. From the records, we noticed that the return of income was filed by the assessee, which was processed under Section 143(1) of the Act. Specifically, the case of the assessee was reopened under Section 147 of the Act by issuance of notice under Section 148 of the Act based on the reasons recorded by the AO, that:

Whereas, on the contrary, the assessee had taken the specific stand that the assessee had not given any loan to any person at all, as the assessee was having a very low cash balance and, even in support thereof, placed on record the bank statements, which also reveal that no loan of Rs. 15 lakh was ever given by the assessee to M/s. Samira Habitats India Ltd:

In this regard, we find that the statement relied upon by the AO while making additions in the case of the assessee did not refer to any document and, moreover, the said statement had already been retracted. It is an admitted fact that the opportunity of cross-examination was not provided to the assessee, nor was any other independent inquiry undertaken by the AO. In this way, the Revenue has failed to discharge its burden.

We are of the view that no incriminating material was found or referred to in the reasons recorded, and the additions were made by the AO only on the basis of a third-party statement, which was also retracted later. Reliance in this regard is also being placed upon the decision of the Coordinate Bench in the case of Deepak Kakubhai Mehta, ITA Nos. 6505–6511/Mum/2025, the operative portion of which is contained in Paras 45–63 and the same is reproduced herein below:

In the present case, the statements relied upon by the Assessing Officer do not refer to any document found during the search at the assessee’s premises. On the contrary, the assessee repeatedly stated that he did not recollect details at that stage and that the same would be verified from records maintained at the office. Such responses, when read in their proper context, cannot be elevated to the status of a clear, voluntary, and unequivocal admission of undisclosed income.

More importantly, the assessee retracted the statements at the earliest available opportunity. The retraction has remained uncontroverted. No cross-examination was carried out, nor was any independent enquiry undertaken to disprove the assertions made therein. The Revenue has thus failed to discharge the burden that lay upon it once the retraction was placed on record.

In the backdrop of the aforesaid legal position, and upon a cumulative and holistic consideration of the facts on record, we are of the considered view that no incriminating material was found during the search conducted at the premises of the assessee which could justify the additions made in respect of the completed assessment years.

Having held so, the additions made for these years are liable to be deleted on this jurisdictional ground alone. Nevertheless, since the Assessing Officer and the learned Commissioner (Appeals) have dealt with the merits of the additions at considerable length, and since extensive submissions have been advanced before us on merits as well, we proceed to examine the substantive sustainability of the additions, so as to render a complete and conclusive adjudication and to avoid any remand-driven uncertainty.

Having adjudicated the jurisdictional infirmity attending the impugned assessments for the completed assessment years, we now proceed to examine the substantive sustainability of the additions made on merits, so as to render a complete and conclusive adjudication of the controversy.

At the outset, it must be noted that section 69 postulates a clear statutory requirement: before an amount can be treated as unexplained investment, the Revenue must establish that the assessee has in fact made such investment and that the assessee has failed to satisfactorily explain the nature and source thereof. The provision does not permit additions to be made on conjectures, surmises, or inferential assumptions divorced from reliable evidence.

In the present case, the primary material relied upon by the Assessing Officer consists of loose sheets, cash ledgers, and notings seized during the course of a search conducted in the case of a third party. It is an admitted position that no such documents were found or seized from the premises of the assessee during the search conducted on him. The assessment orders also do not record the discovery of any corroborative material from the assessee’s possession evidencing the alleged advancement of cash loans.

Equally important is the conduct of the alleged borrower. The record reflects that the statements recorded during the search proceedings in the case of Shri Nilesh Bharani were subsequently retracted. The alleged borrower denied the transactions and furnished explanations regarding the entries appearing in the seized documents. Once such retractions are on record, the burden squarely shifts to the Revenue to establish, through cogent and affirmative evidence, that the original statements represented the true state of affairs. That burden has remained undischarged.

The Assessing Officer, however, proceeded to draw adverse inferences without undertaking any meaningful enquiry. No attempt was made to trace the alleged flow of cash, to examine bank withdrawals corresponding to the alleged cash advances, or to verify the recovery proceedings stated to have been initiated by the assessee or his family members. The assessment orders thus rest on inference piled upon inference, without a firm evidentiary foundation.

It is also relevant to note that during the course of the statement recorded under section 132(4), the assessee consistently stated that details would be verified from records maintained at the office and that recovery proceedings had already been initiated in respect of certain transactions. These assertions were not examined in depth by the Assessing Officer, despite the availability of ample legal authority to do so. The failure of the Revenue to conduct such enquiry cannot be substituted by presumptions adverse to the assessee.

Viewed thus, even on merits, the alleged cash loans have not been established by reliable and cogent evidence. The addition made under section 69 of the Act, therefore, does not survive on merits.

The controversy before us is not res integra. Multiple coordinate benches of the Tribunal have had occasion to examine identical factual situations arising from the same set of searches and involving the same alleged borrower. In these cases, the Tribunal has undertaken an exhaustive analysis of the evidentiary record and has consistently held that additions on account of alleged cash loans are unsustainable in law. In these decisions, the Tribunal has noted that despite the magnitude of the alleged cash transactions, not a single piece of incriminating material was found in the possession of the assessee concerned. The improbability of substantial cash transactions leaving no trace at the lender’s end has been emphasised. The absence of corroborative evidence and the impermissibility of resting additions solely on statements and third-party documents have been highlighted.

The relevant findings recorded by the coordinate benches, which squarely apply to the facts of the present case, are placed on record and are reproduced hereunder.

In Shantilal Savla - ITA No. 357 to 363/Mum/2025 DoD 22/05/2025 13. We have heard the rival submissions and perused the material available on record. The issue pertaining to the existence of incriminating material for the assumption of jurisdiction by the Ld. AO under section 153A of the Act has been duly challenged by the assessee before the Ld. CIT(A) and the Hon’ble ITAT. The incriminating material relied upon by the revenue was found at the premises of Mr. Nilesh Bharani and M/s Evergreen Enterprises, and the statements of the partners therein were recorded as evidence of undisclosed income. It is an undisputed fact that Mr. Nilesh Bharani is engaged in the business of finance, particularly in cash lending and borrowing, and has earned income in cash. However, based on the statement of the assessee, it is evident that the assessee merely advanced a loan of Rs. 35 lakhs to Mr. Nilesh Bharani through banking channels. The assessee was also subjected to a search under section 132 of the Act on 18/12/2017, but no incriminating documents or material were found at the premises of the assessee. The entire addition in the present case is based solely on presumptions and pertains to third parties involved in the same search proceedings. Factually, the same issue has already been adjudicated in favour of the assessee. We respectfully rely on the decisions of the Coordinate Bench of the ITAT-Mumbai in the cases of RajeshkumarRameshchandra Shah vs. DCIT (supra) and Rupal Kashyap Mehta (supra), and observe that the Hon’ble Supreme Court's ruling in AbhisarBuildwell (P.) Ltd. is squarely applicable to the facts of the present case. 14. Accordingly, as there is no incriminating material found in the possession of the assessee during the search, the additions made for AYs. 2012–13 to 2016–17 are beyond the jurisdiction of the Ld. AO under section 153A of the Act. Consequently, Ground Nos. 1 to 3 raised by the assessee are allowed. 17. RajeshkumarRameshchandra Shah - ITA No. 5568 to 5573/M/2024 12. As could be seen from the above extract, in the cross examination taken on oath, on a specific question asked by the assessee, Shri NileshShamji Bharani denied of having entered into any cash loan transaction with the assessee. Thus, the facts on record reveal that except the so called incriminating material seized from the premises of Shri Nilesh Shamji Bharani and some statements recorded u/s. 132(4) of the Act from individuals related to M/s. Evergreen Enterprises, the A.O. had no other corroborative evidence available with him to establish that the assessee had actually advanced any cash loan to Shri Nilesh Shamji Bharani. Moreover, the assessee from the very beginning had emphatically denied of having any cash loan transaction with Shri Nilesh Shamji Bharani. Even, a couple of days after recording of statements u/s. 132(4) of the Act, the concerned persons including Shri Nilesh Shamji Bharani had retracted their statements. In fact, Shri Nilesh Shamji Bharani had filed an Affidavit before the A.O. in course of assessment proceedings completely denying the fact of cash loan transaction and had explained that the entries appearing in the seized document, in reality, represents the cash given to him by his father.

When the assessee as well as Shri Nilesh Shamji Bharani and other individuals have denied of alleged cash transaction in subsequent events, the duty of the A.O. was to gather more corroborative evidence to establish on record that the entries appearing in the seized material actually represent cash loan transaction of the assessee. However, except the seized material and the statements recorded u/s. 132(4) of the Act from some third- party individuals, the A.O. has absolutely no other evidence on record to corroborate the alleged cash loan transaction of the assessee. Pertinently, though, during the time search and seizure operation was carried out in case of M/s. Evergreen Enterprises and Shri Nilesh Shamji Bharani, a search and seizure operation was also carried out in case of the assessee, however, not a single piece of incriminating material was recovered from the assessee indicating involvement of assessee in the alleged cash loan transaction or any other illegal activity. In fact, it is relevant to observe, in the statement recorded u/s. 132(4) of the Act, Shri Jagdish T Ramani, who allegedly was assisting Shri Nilesh Shamji Bharani in his work, had stated that Shri Nilesh Shamji Bharani had instructed him to follow up with the lender, i.e., the assessee, to determine the modality of payment. He had stated that he instructed one of the office boys to collect money from the lender and after the money is collected, it is given to the borrower on execution of a promissory note. He had further stated that after the money is delivered to the borrower and promissory note is obtained, he had instructed the office boy to deliver the promissory note to the lender. It is quite surprising that considering the magnitude of the alleged cash loan transaction appearing in the seized document, not a single piece of incriminating material relating a cash loan transaction was recovered from the assessee during the search and seizure operation conducted on assessee. If the version of Mr. Jagdish T Ramani that the promissory note given by the borrower is delivered to the lender is to be taken on face value, then at least if not all few such promissory notes would have been recovered in course of search and seizure operation carried out in case of the assessee. It is quite improbable that such huge amount of cash loan transaction would not leave any trace of incriminating material /evidence with the assessee. Thus, on cumulative analysis of facts and materials available on record, we are of the opinion that is no conclusive evidence was available with the A.O. to establish on record that the entries appearing in the seized material actually represent cash loan transaction of the assessee. 14. In view of the aforesaid, we have no hesitation in holding that the additions made on account of unexplained investment on account of alleged cash loan transaction and addition made on account of notional interest thereon being not based on cogent evidence, are unsustainable. Accordingly, we direct the A.O. to delete the additions in all the years under dispute.

Hemendra Ramji Vira vs DCIT in ITA No. 2470 to 2472/Mum/2025 (DoD: 26/06/2025) (relevant paras only)

Further, similarly for the AY 2016-17 to 2018-19, the additions were made by the AO by working out the unexplained cash loan given by the assessee to one Mr Nilesh Bharani relying on some information found in a different search and premises of Mr Nilesh Bharani where the name of the assessee was not there in any panchnama by stating that since Mr Nilesh Bharani had admitted in his statement recorded u/s 132(4), receipt of such cash loan from the assessee outside the declared sources in the return of income of the assessee is to be assessed u/s 153A. The said fact was though initially partly admitted by the assessee without actually quantifying the same, yet lateron also retracted by him through an affidavit filed on 09/12/2019 and Mr Nilesh Bharani later also retracted his statement recorded u/s 132(4) vide his letter addressed to the investigation Unit on 14/10/2017. The charts of the additions made are given below: Para 5.33 for alleged cash loan given in the assessment orders 5.33 In the light of the above discussion, the cash loans given by the assessee to Shri Nilesh Bharani are assessed as undisclosed investment in loans amounting to Rs. 29,34,00,000/- for AY 2012-13 to 2018-19, u/s 69 of the IT Act as detailed below.

Leshark Global LLP vs DCIT in ITA No. 3177 to 3183/Mum/2025 (DoD: 31/07/2025) (relevant paras)

Upon a careful consideration of the facts of the case, the rival submissions, and the material available on record, we find that the core issue arising in the present appeals pertains to the additions made under Section 69 of the Act towards alleged cash loans purportedly advanced by the assessee to one Mr. Nilesh Bharani and his associates, as well as the notional interest computed thereon under Section 56. It is undisputed that these additions are founded solely upon certain loose sheets, coded ledger extracts, and statements recovered and recorded during the course of search proceedings conducted not on the assessee but in the case of a third party, namely, Mr. Nilesh Bharani and entities associated with him. 11. As rightly contended by the learned counsel for the assessee, Shri Vinod Kumar Bindal, this precise issue, both in law and in fact has been deliberated upon by the Co-ordinate Benches of the Tribunal in several matters involving identical allegations and evidentiary foundations. He specifically drew our attention to the decisions of the Tribunal in the cases of:  Ms. Rupal Kashyap Mehta vs. DCIT in ITA Nos. 6191 to 6196/Mum/2024 (order dated 27.02.2025),  Rajesh Kumar Rameshchandra Shah vs. DCIT in ITA Nos. 5568 to 5573/Mum/2024 (order dated 31.01.2025), and  Nilesh Bharani vs. DCIT in ITA No. 612/Mum/2020 (order dated 28.02.2023). In each of these matters, the additions made under Sections 69 and 56 were based exclusively on the so-called “incriminating” material seized from the premises of Mr. Nilesh Bharani, which included handwritten ledgers, coded entries, and statements recorded during investigation. The Co-ordinate Benches, after a meticulous examination of the evidentiary trail and the legal framework governing search assessments, unequivocally held that such third- party material howsoever incriminating it may appear cannot be used to make additions in the hands of another assessee under Section 153A, unless the procedural mandate of Section 153C is duly followed. 12. This Tribunal in Nilesh Bharani (supra), while elaborating the statutory architecture, observed that the jurisdiction under Section 153A is strictly confined to the material unearthed during the course of search conducted on the assessee himself. Where the Revenue seeks to act on the basis of documents found during the search of another person, the only lawful recourse is via Section 153C requiring satisfaction to be recorded that the material belongs to or 15 pertains to the assessee and in the absence of such compliance, the jurisdiction exercised under Section 153A would be rendered invalid and the consequential assessment orders, non-est in law. 13. The same reasoning was echoed in Rupal Kashyap Mehta (supra), where this Tribunal found that the alleged transactions were neither corroborated by any material found during the search on the assessee nor independently supported by any verifiable documentation, and that even the statement relied upon by the Revenue had been retracted, unauthenticated, or was otherwise uncorroborated. On those grounds alone, the additions were deleted.

In light of the binding ratio laid down by the Hon‟ble Supreme Court in PCIT vs. AbhisarBuildwellPvt. Ltd. [(2023) 149 taxmann.com 399 (SC)], which held that no addition can be made under Section 153A in respect of unabated assessments in the absence of incriminating material found during the search on the assessee, and following the aforementioned consistent judicial pronouncements of the Co-ordinate Benches, we hold that the additions made in the present case resting entirely on documents recovered from the search conducted in the case of Mr. Nilesh Bharani are legally untenable. The Revenue has neither invoked nor complied with the provisions of Section 153C, and hence, the assumption of jurisdiction under Section 153A in respect of these additions stands vitiated. Consequently, the additions made under Section 69 of the Act across all the assessment years under appeal are hereby directed to be deleted. 15. Consequentially, the additions made under Section 56 of the Act towards notional interest income on the said alleged cash loans quantified and tabulated by the Assessing Officer in paragraphs 5.29 and 5.30 of the assessment order for A.Y. 2012–13 are devoid of any independent legal or factual basis. These additions are purely derivative in nature, arising only from the presumption of unexplained investments having been made, and hence, cannot stand once the substantive additions under Section 69 have been found to be unsustainable. There is neither any primary transaction nor any independently discovered evidence which could justify the estimation of such income. In the absence of any corroborative or incriminating material found during the search, such additions are wholly speculative and deserve to be deleted. Accordingly, all the grounds of appeal pertaining to the additions made under Sections 69 and 56 across the assessment years in question are allowed, and the impugned additions are directed to be deleted in full.

Judicial discipline thus mandates that in the absence of any distinguishing feature brought on record by the Revenue, a consistent view taken by coordinate benches on identical facts ought to be followed. We see no reason to depart from the settled position.

Accordingly, even on merits, the additions made under section 69 of the Act on account of alleged cash loans are unsustainable and are liable to be deleted.

The Assessing Officer has further brought to tax notional interest allegedly earned on the aforesaid cash loans under section 56 of the Act. The computation of such interest is based on estimated rates and on the assumption that the principal amount of cash loans was advanced and remained outstanding over the years.

At the threshold, it must be observed that the addition on account of notional interest is purely derivative in nature. It presupposes the existence of the principal transaction, namely, the advancement of cash loans. Once the substantive addition under section 69 is found to be unsustainable, the superstructure built thereon necessarily collapses.

The Assessing Officer has merely extrapolated figures based on assumptions, without any contractual basis or corroborative evidence. Such an exercise, howsoever arithmetically detailed, does not meet the threshold of legal sustainability.

Accordingly, the additions made under section 56 of the Act towards notional interest on the alleged cash loans are devoid of legal and factual basis and are liable to be deleted.

The AO has based his findings only on the third-party statement, which itself was retracted, and apart from that, there is no other corroborative document. Even the said statement relied upon by the AO does not refer to any other document.

Now before us, once the assessee had taken a categorical stand that no loan was offered by the assessee to the said Samira Habitats India Ltd. and, in this regard, had placed on record the bank statements in order to substantiate its stand, then in our view the assessee had already discharged its onus. It was initially the onus of the assessee to place on record the relevant documents in order to prove that no loan was given by the assessee to Samira Habitats India Ltd.

Therefore, considering the totality of the facts and circumstances as discussed by us above and also keeping in view the decision of the Coordinate Bench of the ITAT in the case of Deepak Kakubhai Mehta, ITA Nos. 6505–6511/Mum/2025, we are of the view that additions cannot be made under Section 69C of the Act. Thus, we direct the AO to delete the said additions. Consequently, Ground Nos. 1 and 2 raised by the assessee stand allowed.

In view of our findings with regard to Ground Nos. 1 and 2, the other grounds raised by the assessee become infructuous and, therefore, do not require separate adjudication.

In the result, the appeal filed by the assessee is partly allowed.

As the facts and circumstances in these appeals are identical to ITA No. 2478/Mum/2026 (Assessment Year: 2009-10) therefore, the decision rendered in above paragraphs would apply mutatis mutandis for these appeal also.

In the result, appeals filed by the assessee stands partly allowed.