ACIT, UDAIPUR vs. MANTRARAJ PALIWAL, NATHDWARA

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 829/Jodh/2025 (Assessment Year 2022-23) ACIT, Udaipur Mantraraj Paliwal 1 Santkripa Uper Ki Oden, Nathdwara, Udaipur- 313001 PAN No. CTIPP 1104 K Assessee by Shri M.S. Jhanwar, CA (Virtually) Revenue by Smt. Seema Meena CIT-DR (Virtually) Date of Hearing 20 / 05 / 2026. Date of Pronouncement 12 / 06 / 2026.

ORDER DR. MITHA LAL MEENA, A.M.: This appeal is filed by revenue against the order of the Commissioner of Income Tax Appeal CIT(A), Udaipur-2 [hereinafter referred to as the CIT(A)] dated 31.07.2025 with respect to the assessment years 2022-23.

2 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 was to pay Rs. 100 per share for acquiring 3 lakhs share of M/s RRP S4E Innovations Pvt. Ltd? 2. Whether on the facts and in circumstance of the case, the ld. CIT(A) is justified in deleting the addition of Rs. 3,00,00,000/- made by the AO u/s 69A on account of unexplained income without appreciating the fact that since the acquisition of 3 lakhs share of M/s RRP S4E Innovations Pvt. Ltd by Sh. Mantraraj Paliwal was completely duly supported by banking transaction at per share price of Rs. 170, the cash payment at per share price of Rs.100 made by Sh. Mantraraj paliwal cannot be disputed? 3. Whether on the facts and in circumstance of the case, the ld. CIT(A) is justified in deleting the addition of Rs. 3,00,00,000/- made by the AO u/s 69A on account of unexplained income and not following the binding judicial precedence of Hon. Supreme Court in case of M/s Banna Lal Jat Const. Comp. Pvt. Ltd. Vs. ACIT, CC-Ajmer[2019] 106 taxmann,com 128(SC)? 4. The appellant craves leave to add, amend or withdraw any of the ground of appeal during the course of appellant proceeding.

3 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 was passed by the AO u/s 143(3) of the I.T. Act, 1961 at assessed total income of Rs. 7,73,43,650/- on 29.03.2024 after making addition of Rs. 3,00,00,000/-.

6.1 The Ld. DR for the Department submitted that the Ld. CIT(A) was not justified in deleting the addition of Rs. 3,00,00,000/- made by the AO u/s 69A on account of un-explained income ignoring that Shri Sanjay Singh, Director of the Miraj Developers Pvt. Ltd. in his sworn statement has stated that Mr. Mantararaj

4 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 Paliwal was to pay Rs. 100 per share for acquiring 3,00,000 shares of M/s RRP S4E Innovations Pvt. Ltd. The Ld. DR has further submitted that the AO has observed that the seized documents have to be read in its entirety not as per the wish of the assessee. The document cannot be half true and half false, either all content of the document will be true or false. There is no discretion available with the assessee to rely upon a part of the document favourable to it and plead for rejection of the other part which is not favourable to it, or in respect of which no supporting material is found. This is akin to “blowing hot and cold together”. [AO order para 9.2]

6.2 The ld. DR argued that the assessee failed to submit any details about the source of the commission paid of Rs. 3,00,00,000/- during the course of assessment proceedings. Accordingly, she contended that the source of payment remains unexplained and the AO has right treated the amount of Rs. 3,00,00,000/- as unexplained income u/s 69A r.w.s. 115BBE of the Income Tax Act, 1961 and added it to the return of the assessee for the assessment year under consideration. The Ld. DR pleaded that the impugned order may be reversed and the assessment order may be restored.

5 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 7. On the other hand, the Ld. Counsel for the assessee heavily relied on the impugned order, he submitted that the Ld. CIT(A) has passed a well-reasoned and detailed order addressing all the observations and objections of the department discussed by the AO in the assessment order. He referred to the relevant finding of the Ld. CIT(A) given vide para 5.3.3 II Pg. 15 to 17 of the impugned order which reads as under:

“The main issue that needs to be decided is whether the transaction of share purchase of M/s RRE S4E Innovations Pvt. Ltd was completed and commission was paid to the agent, on the basis of statement recorded of Sh Sanjay Singh, CEO of Miraj Group and loose document annexed as Annexure-5 to his statement. Sh. Sanjay Singh's statement was recorded u/s 132(4) during the course of search proceedings on 22-24.03.2023. In his reply to Q no 26 of the statement, he has mentioned that - Q no 26 I am showing you a handwritten slip Note which has a content of shares related information (Annexure-5) found in your black bag in Innova car having registration number as RJ 30 UA 3851 during the course of search action in the case of Miraj Group and other associated entities. Please confirm the same and offer your explanation on the contents of this approval note. Ans Sir, I confirmed that the above mentioned note is found in my bag. The question number 25 above. Further, Mr Mantrai Paliwal was supposed to invest in RRP S4E Innovations Pvt Ltd and acquired 3 lakhs shares from them. The share price was quoted Rs 270 per share. We were supposed to pay @ of Rupees 170 Per share for the acquisition and Rs 100 per share was supposed to be paid as commission to the broker Mr Mahavir Chaplot, whose mobile number is 9414161221 and address is HM6V+83, Railway colony, Udaipur Rajasthan 313001. It was also agreed 3,00,000 shares would be acquired by Mr Mantraj Paliwal before the due diligence (DD) reports are generated for which a transfer of rs 5.10 crores was successfully completed on 23.06.2021. I have already submitted the details as for annexure no.4 in my reply to question number 25. The acquisition of the balance 3,00,000 shares was supposed to happen post positive DD reports submitted by all the DD agencies. The overall intent was to acquire 6.29% shares/6 lakhs Shares in RRP S4E Innovations Pvt Ltd. However, during the legal DD process carried on RRPS 4E innovations Pvt Ltd by the legal DD agency M/s K.T. law, it

6 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 was found that there were lot of misrepresentation by RRPS 4E Inovations Private Limited. One of the most significant was a default of Rs 7.5 crore loan availed by then CEO Mr Raj Chodankar of RRTS 4E innovations Pvt Ltd. Sighting this gross regularities, Mr Mantraj Paliwal denied to take any further investment risk in the company and the transaction could not be completed. Failing which the commission at the rate Rs 100 per share was not paid to the broker Mr Maaveer Chaplot. The handwritten note further has a calculation of Net Asset Value (NAV) wherein, it is explained that RRPS 4E innovations Pvt Ltd's Net Worth as on 31.03.2021 was Rs 38.06 crores and they had issued preference shares of Rs 1.81 crore taking their total net worth to Rs 36.25 crores. At the same time, they had issued 47,67,033 no. shares translating into book value of Rs 76.04 per share. Hence, it is clear from the answer given by Sh Sanajy Singh that although 3 lakh shares were purchased by the appellant but as the due diligence conducted by various DD agencies gave negative reports, further shares were not purchased. On perusal of Annexure -5, it is found that there is no narration of paid or not paid against either Rs 5.01 crores(share value) or Rs 3 crores (commission). Only the amounts are mentioned along with DD agencies charges of Rs 30 lakhs. The banking transactions along with the noting on the loose document proved that the shares have been purchased and payment of Rs 5.10 crores made. Although Sanjay Singh gave all details of the Commission agent with address and mobile number, but no enquiry was made either by the Authorised officer during the search proceedings or by the AO during the assessment proceedings, which should have been conducted to reach any conclusion. The sanctity of statement has been proved by various court decisions and it has been again and again decided that statement recorded u/s 132(4) has evidentiary value. The statement recorded u/s 132(4) have great evidentiary value as held by Hon'ble High Court of Rajasthan in D. B. Income Tax Appeal No. 67/2002 in the case of Commissioner of Income Tax, Bikaner versus Shri Ravi Mathur, A-8 Shyam Nagar, Jaipur as under- "In our view, the statements recorded under section 132 (4) have great evidentiary value and it cannot be discarded as in the instant case by the Tribunal in a summary or in a cryptic manner". Sh. Sanjay singh has categorically declined that due to certain issues with due diligence process, the transactions were not accepted to be complete and hence, commission payment was not made. The AO has failed to conduct any further enquiry and only on the basis of noting on the loose sheet reached a conclusion that the commission was paid although Sanjay Singh has provided all information in his statement regarding the commission agent. The emails submitted by the appellant during appellate proceedings do suggest that the appellant was interested in taking over 18-20% of the holding in the said company.

7 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 Another issue involved was that the assessee was supposed to buy 6.29% or 6 lakh shares as per initial discussion. The appellant has provided these figures. The AO has taken an argument while passing assessment order that 3 lakh shares is equivalent to 6.29% and not 6 lakh shares and 3 lakh shares has already been purchased and hence, transaction has been complete. This is true that 6.29% shares is equivalent to 3 lakh shares and not 6 lakh shares but it cannot conclusively prove that the commission has been paid. The AO was expected to verify it further to prove that the actual payment has been made, especially when the person who provided all information in his statement is categorically declining that the commission amount has not been paid and that too in same statement u/s 132(4) recorded during search proceedings. The AO has failed to provide any logical basis to prove that the said commission has been paid and his decision is totally based on surmises and guess work, which cannot be sustained for making any addition. Hence, appellant is given relief on this issue and Rs 3,00,00,000/- added by AO as commission paid to agent is deleted.”

7.1 The Ld. Counsel has pleaded that the impugned order may be upheld. In support he filed a written note that AOs finding were based on surmises and guesswork which reads as under:

(i) The AO's entire addition rests on a single loose paper (Annexure-5) found in a black bag belonging to Sh. Sanjay Singh, an e employee of Miraj Group e Respondent's possession. No cash, bullion or valuable article was found with the not in the e Respondent during search. The sine qua non of Section 69A that the assessee be "found to be the owner of any money" - is wholly absent. (ii) Sh. Sanjay Singh, in the very same - statement u/s 132(4) relied upon by the AO (Answer to Q.26), categorically stated that the transaction was not completed and commission was NOT paid to the broker Mr. Mahaveer Chaplot. The AO selectively relied on parts of the statement favourable to Revenue while ignoring the exculpatory portion - precisely the "blowing hot and cold" the AO accused the assessee of. (iii) The AO made ZERO independent enquiry from the alleged recipient of Rs. (broker Mahaveer Chaplot), despite Sanjay Singh providing his full name, address and mobile number. This fatal omission was rightly noted by CIT(A). (iv) no withdrawal from Respondent's bank accounts, no receipt by broker, no seizure of cash during search.

8 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 (v) The AO's own language - “it is presumed that corresponding commission...was paid” - is a judicial admission of guesswork. B. Applicable Case Laws: (1) Dhakeshwari Cotton Mills Ltd. v. CIT The AO is not [1954] 26 ITR 775 (SC) The AO is not entitled to make a pure guess without any evidence or material at all. An assessment based on guesswork ignoring the assessee's evidence is bad in law. (2) CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) "Suspicion, however strong, cannot take the place of proof." The onus is on the Department to prove that a sum belonged to the assessee. (3) DCIT v. Sunil Kumar Sharma [2024] 159 taxmann.com 179 (Karnataka HC) Loose sheets found in the house of a third party cannot be considered as evidence without producing corroborative evidence. SLP dismissed: [2024] 168 taxmann.com 77 (SC). (4) CBI v. V.C. Shukla (1998) 3 SCC 410 Loose sheets/diaries are not "books of account"; entries therein are inadmissible person in absence of to charge corroboration. Applied in Common Cause v. Uol [2017] 77 taxmann.com 245 (SC). (5) DCIT V. Biharilal Shadhuram Chhabriya, ITA 106-109/Nag/2023 (ITAT Nagpur 2025) Section 69A addition invalid where assessee not found owner of any money; loose documents from third party cannot be used to extrapolate income without cogent evidence. 6) Jagdish Soni v. 364/Jodh/2023 DCIT, ITA 362- (ITAT Jodhpur, 04.03.2024) Loose scribbling notings are "dumb documents": addition cannot be made on their basis in absence of corroborative evidence. “Guess work or are strong estimation or extrapolation of income is not permissible unless there evidences to suggest otherwise." (7) CIT v. Smt. P.K. Noorjahan [1999] 237 FITR 570 (SC) The word “may” in Section 69A confers discretion, not obligation. The AO cannot mechanically deem income. [II]

A. The banking channel payment SUPPORTS the Respondent, not the Department:

9 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 (i) The fact that Rs. 5.10 crores was paid e through banking channels at Rs. 170/share proves the Respondent -transparently. It does NOT prove any further cash payment of Rs. 100/share was made. The AO's reasoning is a non sequitur: completion of the banking leg does not - establish occurrence of the alleged cash leg. (ii) Sh. Sanjay Singh's statement u/s 132(4) the very statement the AO relies upon e categorically denies the cash payment. The SAO cannot cherry-pick favourable portions = while discarding the exculpatory portion of = the same statement. (iii) The retraction was within 7 days via notarized affidavit far stronger than the cases where courts have accepted retractions. B. Applicable Case Laws: (1) Kailashben Manharlal Chokshi v. CIT [2008] 174 Taxman 466 (Gujarat HC) Statement recorded during late hours of search, retracted shortly thereafter, held unreliable. Addition deleted. Assessment cannot be based merely on a statement u/s 132(4) which is later retracted without corroborative evidence. (2) CIT v. S. Khader Khan Son [2012] 25 taxmann.com 413 (SC) No addition can be made merely on the basis of a statement obtained during search without corroborating evidence. Confessional statements cannot form the sole basis. (3) Pullangode Rubber Produce Co. Ltd. v. State of Kerala (1973) 91 ITR 18 (SC) An admission is an extremely important piece of evidence but it is not conclusive. It is open to the person who made it to show that it is incorrect. (4) CBDT Instruction F.No. 286/2/2003- IT (Inv.II) dated 10.03.2003 Binding on the Department: “No attempt should be made to obtain confession as to the undisclosed income... Any action on the contrary shall be viewed adversely... assessing officers should rely upon the evidences/materials gathered during the course of search." (5) Andaman Timber Industries v. CСЕ [2015] 62 taxmann.com 3 (SC) Not allowing cross-examination of the witness whose statement is made the basis of the order is a serious flaw making the order a nullity. (6) Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC) Where assessee furnishes affidavits and the Revenue neither cross- examines nor leads contrary evidence, the affidavit must be accepted as true. (7) H.R. Mehta v. ACIT (2016) 387 ITR 561 (Bombay HC)

10 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 Denial of cross-examination goes to the root of the matter Denial of cross- and strikes at the very foundation of the assessment. (8) Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) Evidence obtained behind the back of the assessee without cross-examination is inadmissible. 8. We have heard both the sides, perused the material on record, impugned order and case law cited before us. A search u/s 132 was conducted on 21.09.2023 on the Miraj Group including the respondent assessee. The AO made an addition of Rs. 3,00,00,000/- u/s 69A r.w.s. 115BBE on account of alleged cash commission payment of Rs. 100 per share on acquisition of 3,00,000 shares of M/s RRP S4E Innovations Pvt. Ltd. The Ld. CIT(A) has deleted the addition in its entirety, holding that the AOs decision was based on surmises and guesswork. From the record, it is revealed that the AO has made the addition based on a loose paper Annexure 5 found in the black bag belonging to Sanjay Singh, an employee of Miraj Group and not in the respondent assessee’s possession. It is noted that there was no cash, bullion or valuable article was found with the respondent during the search. The sine qua non of Section 69A that the assessee be “found to be owner of any money” is wholly absent. The department failed to rebut the contentions of the respondent assessee that Shri Sanjay Singh in his very same statement u/s 132(4) relied upon by the AO in answer to Question no.

11 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 26 categorically stated that the transaction was not completed and the commission was not paid to the broker Mr. Mahaveer Chaplot.

8.1 We find that the AO has made no independent enquiry from the alleged recipient of Rs. 3,00,00,000/- i.e. broker Mahaveer Chaplot despite the fact that Shri Sanjay Singh provided his full name, address and mobile number and this fatal omission was rightly noted and appreciated by Ld. CIT(A). It is further noted that there was no evidence brought on record regarding withdrawal from respondent’s bank account, no receipt by the broker and that there was no seizure of any cash during the search. It is evident from the AO’s own language where he has observed that “corresponding commission….. was paid” – is a judicial admission of guesswork by the AO.

8.2 From the statement of Shri Sanjay Singh recorded u/s 132(4), it is apparently clear that he has categorically denied any cash payment as alleged by the department. In our view, the AO cannot relied on favourable portion of the statement while declining the exculpatory portion of the same statement. Meaning thereby, the department is not permitted under the law to blow hot and cold at the same time on the same piece of evidence. It is further noted that there was retraction within seven days via notarized affidavit far more stronger than

12 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 the cases relied by the department where Court have accepted such retractions and that the department has not controverted the contents of the affidavit furnished by the assessee to the effect of retraction.

8.3 The Hon’ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. Vs. CIT (supra) held that AO is not entitled to make pure guess without support of any evidence or material at all. An assessment based on guesswork ignoring the assessee’s evidence is bad in law. In another case of CIT Vs. Daulat Ram Rawatmull (supra), the Apex Court held that “suspicion, however strong, cannot take the place of proof.” Thus, the onus is shifted on the department to prove that sum disputed belongs to the assessee.

8.4 Recently, coordinate Bench of Nagpur ITAT in the case of DCIT Vs. Biharilal Shadhuram Chhabriya (supra) has held that Section 69A is invalid where assessee not found owner of any money and loose documents found from third party cannot be used to extrapolate income without cogent evidence. The coordinate Jodhpur Bench of ITAT in the case of Jagdish Soni Vs. DCIT (supra) has held that loose scribbling notings are dumb documents, addition cannot be made on that basis in absence of corroborative evidence. Guess work or estimation or

13 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 extrapolation of income is not permissible unless there are strong evidences to suggest otherwise.

8.5 In the present case, the payments of Rs. 5.10 crores through banking channels @ 170 per share proves the genuineness of the transaction of the respondent assessee, however, it does not prove any further cash payment of Rs. 100 per share as alleged by the Department. The department allegation based on reasoning is non sequitur – completion of banking leg does not establish occurrence of the alleged cash leg. Further in the statements recorded u/s 132(4), Shri Sanjay Singh has categorically denied any cash payment.

8.6 The judgment of Supreme Court in the case of Bannalal Jat Constructions Pvt. Ltd. Vs. ACIT (supra) is distinguishable on facts of the present case as in that case, cash of Rs. 1,21,43,210/- was physically found at the residential premises during the course of search, whereas in the present case, no cash what so ever was found. Further in the case of Bannalal Jat Constructions Pvt. Ltd. Vs. ACIT (supra) the retraction was made by the assessee at the assessment stage after (years later), whereas in the present case, retraction was made within seven days with the support of notarized affidavit and that in the case of Bannalal Jat Constructions Pvt. Ltd. Vs. ACIT (supra) books were incomplete with admitted

14 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 inflation of expenses, whereas in the present case, there was no such infirmities found existed. Thus, in the case of Bannalal Jat Constructions Pvt. Ltd. Vs. ACIT (supra), there was independent corroboration to the cash found physically during the course of search whereas in the present case, there was no cash, bullion and valuable article or document found from the respondent assessee during the course of search. Thus, the case of Bannalal Jat Constructions Pvt. Ltd. Vs. ACIT (supra) relied by the department is distinguishable on the facts of the present case and as such not applicable as rightly observed by the Ld. CIT(A).

8.7 In view of the above discussion and judicial precedence, we find no infirmity or perversity in the impugned order passed by the Ld. CIT(A) to the facts on record. We do not find any merits and substances in the issue raised in ground no. 1 and 2 of the appeal and pleadings by the ld. CIT-DR in support. Accordingly, we hold that Ld. CIT(A) is justified in deleting the addition of Rs. 3,00,00,000/- made by the AO u/s 69A on account of unexplained income. Thus, ground no. 1 and 2 of the department are rejected.

15 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 Court in the case of M/s Banna Lal Jat Const. Comp. Pvt. Ltd. Vs. ACIT, CC, Ajmer 2019 106 taxmann.com 128 SC.

16 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 11. The judgment of Bannalal Jat Vs. ACIT (supra) is factually distinguishable and not applicable to the present case because:

(i) In the case of Bannalal Jat (supra), cash amounting to Rs. 1,21,43,210/- was physically found and inventorised at the residence during the course of search whereas in the present case, no cash what so ever was found. (ii) In the case of Bannalal Jat (supra), retraction was made only at the assessment stage (years later) whereas in the present case, the retraction was made within 7 days by the inventorized affidavit. (iii) In the case of Bannalal Jat (supra), books were incomplete with admitted inflation of expenses whereas in the present case, no such infirmities existed. (iv) In the case of Bannalal Jat (supra), there was independent corroboration whereas in the present case only material was one loose paper and one statement where the statement itself denies payment thus, there was no corroboration.

11.1 Accordingly, we hold that the judgment of Hon’ble Supreme Court in the case of M/s Bannalal Jat (supra) was not applicable to the facts of the present case. We, therefore, do not find any reason to interfere in decision of the Ld. CIT(A) in deleting the addition of Rs. 3,00,00,000/- made by the AO u/s 69A on account of unexplained income. Thus, ground no. 3 of the department is rejected.

17 ITA No. 829/Jodh/2025 Asst. Year: 2022-23 13. In the result, the appeal of the Department is rejected.

Order pronounced on 12/06/2026 under Rule 34(4), in accordance with the Income Tax (Appellate Tribunal) Rules, 1963.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 12/06/2026. Nimisha Sr. PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File BY ORDER,