RAJENDRA SINGH KARNAWAT,MUMBAI vs. DCIT 19(3), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH; MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No. 580/Mum/2026 (Assessment Year: 2012-13)

Rajendra Singh Karnawat DCIT 19(3) Flat 78A, 7th Floor, Jaldarshan Piramal Chambers, Lalbaug, CHSL, 51, Jaldarshan Marg, vs. Parel, Mumbai, Maharashtra, Mumbai, Maharashtra, 400013 400026.

PAN: AAXPK7740C (Appellant) (Respondent) For Assessee : Shri Prakul Khurana Adv. & Sapan Jain (Virtually) For Revenue : Shri Sandeep Lakra CIT DR. Date of Hearing : 25.06.2026 Date of Pronouncement : 21.09.2026 O R D E R PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], dated 18.12.2025, pertaining to Assessment Year (AY) 2012-13, wherein the Assessee has taken the following grounds of appeal:

“1. Under the facts and the circumstances of the case and in law, Impugned order dated 18.12.2025 passed by the Learned Commissioner of Income Tax ["Ld. CIT(A)"] u/s 250 of the Income Tax Act, 1961 ["the Act"] is perverse, arbitrary, non-speaking and bad in law and is passed without granting adequate opportunity of being heard.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 2. Under the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO in reopening the assessment u/s 147 r.w.s. 144B of the Act. 3. Under the facts and circumstances of the case and in law, a. the impugned notice u/s 148 of the Act is invalid, perverse, arbitrary and bad in law b. impugned reasons to believe are invalid and bad in eyes of law. c. impugned approval u/s 151 of the Act is non-existing, bad in law and thereby the action of the Ld. AO is without jurisdiction. 4. Under the facts and circumstances of the case and in law, the Ld. AO has erred in assuming jurisdiction u/s 147 of the Act based on alleged material/information/statements allegedly unearthed during search in case of other person on or before 01.04.2021. 5. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the assessment proceedings without following the procedures prescribed u/s 144B for faceless assessment. 6. Under the facts and circumstances of the case and in law, the Ld. CIT(A) erred in: a. confirming the addition of Rs. 13,20,00,000/- as unexplained investment u/s 69 of the Act. b. confirming the addition of Rs. 14,14,627/- as undisclosed interest income. 7. Under the facts and circumstances of the Act, the Ld. CIT(A) has erred in: a. upholding the action of Ld. AO, which is based on unconfronted, unreliable, third-party information, uncorroborated statements and alleged excel sheets. b. upholding the action of Ld. AO without providing the material/information/documents relied upon against the Assessee and giving an opportunity of rebuttal thereof. 8. Under the facts and circumstances of the Act, the Ld. CIT(A) has erred in confirming the interest u/s 234A, 234B and 234C of the Act. 9. The appellant craves leave to add, alter, amend, or withdraw any grounds of appeal at the time of hearing.”

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 2. Firstly, we refer to ground no. 6 & 7 of the assessee’s appeal wherein the assessee has challenged the sustenance of addition of Rs 13,20,00,000 as unexplained investment u/s 69 of the Act and the addition of Rs. 14,14,627/- as undisclosed interest income and the contentions advanced by the ld Counsel for the assessee and ld DR for the Revenue during the course of hearing in this regard.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat In this case, information was received from ACIT Central Circle-3, Jaipur vide letter No. ACIT/CC-3/JPR/2018-19/2330 dated 08.03.2019, wherein it is stated that search & seizure action u/s 132 of the Income Tax Act,1961 was carried out in the case of Ramesh Manihar Group on 07.01.2016. The group has been indulging in cash loan financing on a large scale. During the course of search, voluminous data comprising of excel sheets in the 18 pen-drives seized during the course of search action at the main office of the Ramesh Manihar Group at 303, Ratna Sagar, MSB kaa Rasta, Johari Bazar, Jaipur, which consisted details of cash loans financed by the Ramesh Manihar Group was found. Analysis of Information received Based on the analysis, it was found that the persons of the Ramesh Manihar group, being Shri Ramesh Chand Maheshwari and Shri Manmohan Krishan Bagla were engaged as finance brokers for arranging cash loans between various borrowers and lenders which were not reflected in the books of accounts and that the brokerage received for such unrecorded cash transaction was also not offered for taxation by the group. During the course of assessment proceedings u/s 153A, Shri Ramesh Manihar and Shri Manmohan Krishan Bagla were examined in detail about the entries in the excel sheets in the pendrives. Both of them admitted that they merely acted as finance brokers and that the cash was given from one party to another. Findings of the A.O In this analysis it is found that Shri Rajendra Karnawat (PAN – AAXPK7740C) has advanced unaccounted loans in cash total of Rs. 13,20,00,000/-. This unaccounted loan was not offered for tax hence it requires to be taxed as per the provisions of The Income Tax Act, 1961. Further, the assessee has also earned unaccounted interest thereon which also requires to be taxed. Basis of forming reason to believe and details of escapement of income On the basis of the aforesaid information available with the undersigned, I have reason to believe that the assessee has escaped the income of Rs. 13,20,00,000/- or any other income chargeable to tax which comes to notice subsequently in the course of proceedings for re-assessment. Therefore, I am satisfied that at least Rs. 13,20,00,000/-has escaped assessment within the meaning of section 147 of the IT Act 1961 for the reason of failure on the part of the assessee to disclose true and complete particulars of income for the year under consideration. Applicability of provisions of section 147/151 to the facts of the case In this case, more than four years have been lapsed from the end of the assessment year under consideration. Hence, your goodself is requested

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat to kindly accord necessary approval to issue notice u/s 148 for AY 2012- 13 as per the provisions laid down u/s 151(1) of the Income-tax Act, 1961. You are being provided the reasons of reopening of assessment u/s 147 of the Income Tax Act, 1961. If you have any objection against the reasons of reopening of assessment, you may file the same in this office within 15 days of receipt of this letter.” 5. On perusal of the reasons so recorded, it is noted that the Assessing Officer stated that, as per the information so received, Ramesh Manihar Group was indulging in cash loan financing on a large scale, and voluminous data comprising of Excel sheets in 18 pen drives were seized during the course of search action, which consisted of cash loans financed by Ramesh Manihar Group, and based on analysis, the Assessing Officer stated that the assessee has advanced unsecured loans in cash totaling Rs. 13,20,00,000/- which was not offered for tax, hence it is required to be taxed as per the provisions of the Act. Further, the assessee has also earned unaccounted interest thereon, which is required to be taxed. Basis that, the reasons were recorded holding that income atleast to the extent of Rs. 13,20,00,000/- has escaped taxation within the meaning of section 147 of the Act for the reason of failure on the part of the assessee to disclose truly and completely particulars of income for the year under consideration.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat various parties, as to whether the said amount has been offered to tax, to provide details of interest received from various parties on the loan amount given, and to provide name, PAN, address, ITR and email ID of the parties to whom unsecured loan has been given, mentioning the amount, date on which the loan was given to each party, besides other details.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat of the incomplete statement of Ramesh Manihar, it is evident that no question was even asked to Ramesh Manihar as to what stands for R. Karnawat, which establishes that the ACIT, Central Circle 3, Jaipur and the AO interpreted the seized material on their own assumption and presumption. Further, reliance was placed on the Coordinate Jaipur Benches decision in case of Prakash Chand Kothari vs. DCIT, Central Circle 2, Jaipur, ITA No. 1190/JP/2019, wherein a similar matter relating to undisclosed cash loans, arising out of search proceedings in case of Ramesh Manihar Group, was subject matter of examination by the Coordinate Bench, and it was held that the Assessing Officer has merely relied upon the extracts of certain uncorroborated excel sheets found during the course of search, and such excel sheets do not point out to the fact that the assessee has given loans in cash to different persons, nothing concrete is discernible from those excel sheets, and the Assessing Officer has failed to corroborate the excel sheet with independent evidences, and unless such corroborated evidences were brought on record, the additions were held not justified and which were set-aside.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 11. Thereafter, a show cause dated 01.01.2022 was issued to the assessee seeking necessary explanation from the assessee, and the contents of the show cause reads as under: “5.1 Search & seizure action u/s 132 of the IT Act, 1961 was carried out in the case of Ramesh Manihar Group on 07.01.2016. The Group has been indulging in cash loan financing on a large scale. During the course of search, voluminous data comprising of excel sheets in the 18 pen-drives seized during the search action at the main office of the Ramesh Manihar Group at 303, Ratna Sagar, MSB Kaa Rasta, Johari Bazar, Jaipur, which consisted details of cash loans financed. 5.2 As a result of the aforesaid search & seizure operation, it was found that the persons of the Ramesh Manihar Group, being Shri Ramesh Chand Maheshwari and Shri Manmohan Krishan Bagla were engaged as finance brokers for arranging cash loans between various borrowers and lenders which were not reflected in the books of accounts and that the brokerage received for such unrecorded cash transactions was also not offered for taxation by the group. 5.3 The data was analysed in detail by DDIT-2, Jaipur. It has been found that the figures in the aforesaid data was suppressed by the five zeroes, as is evident from the corroboration of entries found in the excel sheets with the documents seized during the course of search action in the cases of Manglam Group [DOS:02.11.2016], Chandra Prakash Agarwal Group [DOS:28.07.2016] and Bihari Lal Hola RamGroup [DOS:08.12.2015]. Based on the investigation carried out, the identities of a number of lenders whose names were recorded in the said data was also determined. This was done though various means primarily from other excel sheets in the 18 pen-drives containing details of loans arranged through cheques/banking channels. Such excel sheets were also found to be in similar format as that of excel sheets containing details of cash loans. The aforesaid excel containing details of cheque loans contained the same keywords of the borrowers and lenders as in the excel sheets containing the details of cash loans, along with the names of the business concerns as well as complete names of the persons. Data of lenders maintained on the computer of the receptionist at their office, contacts stored in mobile phone etc. were also used to ascertain the complete details of names and addresses of the lenders and from such data, PAN numbers of the lenders were retrieved. The assessee in the present case is also found to have advanced unaccounted cash loans amounting to Rs.13,20,00,000/-. 5.4 During the course of assessment proceedings u/s 153A, Shri Ramesh Manihar and Shri Manmohan Krishan Bagla were examined in detail about the entries in the excel sheets in the Pen drives. Both of them admitted that they merely acted as finance brokers and that the cash was given from one party to another. The relevant part of the Shri Ramesh Manihar recorded on oath u/s 131 dated 08.11.2017 is reproduced as under:

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat प्रश्न-21 जब Pen drives की फ़ाइलों में दजज ऱाशि क़ा स्त्रोत एवं ऩामी की पहच़ान आपने नह ं कऱायी और आप यह म़ानते हैं कक इस ऱाशि क़ा मूल योग 9450.27 करोड़ रुपये बनती व आग़ामी अर्थोपपत आय म़ान ल ज़ावे। उत्तर जैस़ा कक मैं पूवज में बत़ा चुक़ा हूूँ कक इतऩा बड़़ा रकम हमने ककय़ा ह नह ं है किर आध़ार ककस ब़ात क़ा जजसके आध़ार पर ददय़ा हुआ क़ायज बत़ा रह़ा है। कमीिन के क़ायज में हम़ार भूशमक़ा मध्यस्त्र्थ की होती है जजसके बदले हमें दो प़ाई य़ा पैस़ा दूसर प़ार्टी को ददलव़ाते हैं। ककसी भी सूरत में यह पैस़ा हम़ाऱा नह ं म़ाऩा ज़ा सकत़ा क्योंकक हम एजेंर्ट है। अतः यह हम़ार आय नह ं म़ानी ज़ा सकती। प्रश्न-22 जैस़ा कक आपने बत़ाय़ा कक आप द्व़ाऱा केवल कमीिन क़ा ह क़ायज ककय़ा ज़ात़ा है। एक प़ार्टी क़ा पैस़ा दूसर प़ार्टी को ददलव़ाय़ा ज़ात़ा है। इस ब़ारे में आपको पुनः एक अवसर ददय़ा ज़ात़ा है कक कृपय़ा कुछ ऐसे व्यजक्तयों के ऩाम क़ा धन बत़ावें जजनकी / जजनको ि़ाइनेंस की ऱाशि उपलब्ध करव़ायी गई । उत्तर जैस़ा कक मैंने पूवज में बत़ाय़ा है कक प़ादर्टजयों के ऩाम पते लोन की जस्त्लप पर शलखे ज़ाते र्थे और जैसे ह क़ाम होने व़ाले को देत़ा र्थ़ा। यह जस्त्लप लोन देने व़ाले के प़ास ह रहती र्थी। पैसे ख़ाने व लेज़ाने क़ा क़ायज हम़ारे कमजच़ाररयों द्व़ाऱा ह ककय़ा ज़ात़ा र्थ़ा। अतः हम व्यजक्तगत रूप से लोन देने व लोन लेने व़ाले को नह ं पहच़ानते। हम़ाऱा क़ायज एजेंर्ट क़ा ह होत़ा र्थ़ा। अन्य कोई ररकॉर्ज न होने के क़ारण लोन देने व लेने व़ाल प़ार्टी को ढूंढ कर उनसे ब़ात करऩा नह ं हो प़ा रह़ा है, किर भी मैं कोशिि करत़ा कक उक्त सूचऩा प्ऱाप्त कर पवभ़ाग को देने क़ा प्रयत्न करूूँग़ा।

5.5 Under the above facts and circumstances, queries were raised to the assessee vide questionnaire issued alongwith the notice u/s 142(1) of the I.T. Act, 1961, thereby requesting the assessee to furnish the details of source of the amount of Rs. 13,20,00,000/- advanced as unsecured cash loans during the financial year 2011-12 and whether the same has been offered to tax. 5.6 In response to the above, the assessee failed to furnish anything substantial and denied to have given any such loans in cash. As the assessee has failed to furnish the source of the amount of Rs. 13,20,00,000/- advanced as cash loans, the same has remained unexplained and accordingly the unaccounted loan amount of Rs. 13,20,00,000/- is treated as unexplained money of the assessee and added to his total income.” 12. In response, the assessee reiterated that he has not been provided any of the documents (supplementary documents) as stated in the letter dated 08.03.2019 indicating that the assessee has provided unsecured unaccounted loans, copy of the statements recorded of the person alleging that the assessee has provided loan through the group, any other information received by the Assessing Officer qua the assessee, the analysis of information so done by the Assessing Officer, and any

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat supporting evidence available with the Assessing Officer and it was submitted that the entire ground of initiation of reassessment proceedings is that some information has been received from ACIT, Central Circle, Jaipur based on search and seizure action under section 132 of the Act carried out in the case of Ramesh Manihar Group and reliance seeks to be placed on the statement of Ramesh Manihar and Manmohan Krishna Bagla. It was submitted that under similar circumstances, on the basis of the same search proceedings and similar excel sheet entries, the assessment was reopened in the case of Prakash Chand Kothari vs. DCIT (Supra), wherein the Coordinate Bench has held that in view of the variance in the statement of the persons, such statements cannot be relied upon to reopen the assessment. It was further submitted that in the said decision, the Coordinate Bench has held that in absence of any concrete corroborative evidence, the excel sheets could not be relied upon by the Assessing Officer to allege that the cash loan was advanced to the assessee. Further, reliance was placed on the decision of Hon'ble Supreme Court in case of Central Bureau of Investigation vs. V.C. Shukla, [1998] 3 SCC 410, wherein it was held that the entries in a diary, notebook, and file containing loose sheet papers, not in the form of books of accounts, are not relevant and not admissible under Section 34 of the Evidence Act. Further, as to the value of the entries in the books of accounts, it was submitted that such statements shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and they are only corroborative evidence and even in those cases, independent evidence is necessary as to the trustworthiness of those entries, which is a requirement to fasten the liability on the assessee. It was accordingly submitted that such excel sheets or statements without corroboration have no authenticity and therefore cannot be relied upon and in absence of assessee being provided with any concrete evidence proving such cash loan advancement, drawing any assumption or forming any belief that such transactions are

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat of the assessee does not arise and the Assessing Officer thus proposes to make addition merely on the basis of surmises, suspicion, and guesswork, which cannot be a ground to make such huge addition. It was accordingly submitted that the assessee has not advanced any cash loans as so alleged and the proposed addition is not sustainable in law and, therefore, the same should be dropped.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat was also not offered for taxation by the group. It was further stated that the data was analysed in detail by DDIT-2, Jaipur. It has been found that the figures in the aforesaid data was suppressed by the five zeroes, as is evident from the corroboration of entries found in the excel sheets with the documents seized during the course of search action in the cases of Manglam Group [DOS:02.11.2016], Chandra Prakash Agarwal Group [DOS;28.07.2016] and Bihari Lal Hola RamGroup [DOS:08.12.2015]. Based on the investigation carried out, the identities of a number of lenders whose names were recorded in the said data was also determined. This was done through various means primarily from other excel sheets in the 18 pen- drives containing details of loans arranged through cheques/banking channels. Such excel sheets were also found to be in similar format as that of excel sheets containing details of cash loans. The aforesaid excel containing details of cheque loans contained the same keywords of the borrowers and lenders as in the excel sheets containing the details of cash loans, along with the names of the business concerns as well as complete names of the persons.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat जब Pen drives की फ़ाइलों में दजज ऱाशि क़ा स्त्रोत एवं ऩामी की पहच़ान आपने प्रश्न-21 नह ं कऱायी और आप यह म़ानते हैं कक इस ऱाशि क़ा मूल योग 9450.27 करोड़ रुपये बनती व आग़ामी अर्थोपपत आय म़ान ल ज़ावे। जैस़ा कक मैं पूवज में बत़ा चुक़ा हूूँ कक इतऩा बड़़ा रकम हमने ककय़ा ह नह ं है किर उत्तर आध़ार ककस ब़ात क़ा जजसके आध़ार पर ददय़ा हुआ क़ायज बत़ा रह़ा है। कमीिन के क़ायज में हम़ार भूशमक़ा मध्यस्त्र्थ की होती है जजसके बदले हमें दो प़ाई य़ा पैस़ा दूसर प़ार्टी को ददलव़ाते हैं। ककसी भी सूरत में यह पैस़ा हम़ाऱा नह ं म़ाऩा ज़ा सकत़ा क्योंकक हम एजेंर्ट है। अतः यह हम़ार आय नह ं म़ानी ज़ा सकती। जैस़ा कक आपने बत़ाय़ा कक आप द्व़ाऱा केवल कमीिन क़ा ह क़ायज ककय़ा ज़ात़ा प्रश्न-22 है। एक प़ार्टी क़ा पैस़ा दूसर प़ार्टी को ददलव़ाय़ा ज़ात़ा है। इस ब़ारे में आपको पुनः एक अवसर ददय़ा ज़ात़ा है कक कृपय़ा कुछ ऐसे व्यजक्तयों के ऩाम क़ा धन बत़ावें जजनकी / जजनको ि़ाइनेंस की ऱाशि उपलब्ध करव़ायी गई । जैस़ा कक मैंने पूवज में बत़ाय़ा है कक प़ादर्टजयों के ऩाम पते लोन की जस्त्लप पर शलखे उत्तर ज़ाते र्थे और जैसे ह क़ाम होने व़ाले को देत़ा र्थ़ा। यह जस्त्लप लोन देने व़ाले के प़ास ह रहती र्थी। पैसे ख़ाने व लेज़ाने क़ा क़ायज हम़ारे कमजच़ाररयों द्व़ाऱा ह ककय़ा ज़ात़ा र्थ़ा। अतः हम व्यजक्तगत रूप से लोन देने व लोन लेने व़ाले को नह ं पहच़ानते। हम़ाऱा क़ायज एजेंर्ट क़ा ह होत़ा र्थ़ा। अन्य कोई ररकॉर्ज न होने के क़ारण लोन देने व लेने व़ाल प़ार्टी को ढूंढ कर उनसे ब़ात करऩा नह ं हो प़ा रह़ा है, किर भी मैं कोशिि करत़ा कक उक्त सूचऩा प्ऱाप्त कर पवभ़ाग को देने क़ा प्रयत्न करूूँग़ा। 16. The Assessing officer further stated that under the above facts and circumstances, queries were raised to the assessee vide questionnaire issued alongwith the notice u/s 142(1) of the I.T. Act, 1961, thereby requesting the assessee to furnish the details of source of the amount of Rs. 13,20,00,000/- advanced as unsecured cash loans during the financial year 2011- 12 and whether the same has been offered to tax. As requested, the letter from ACIT, Cir-19(3), Mumbai dated 08.03.2019 was also shared with the assessee. It was stated that in response to the above, the assessee failed to furnish anything substantial and denied to have given any such loans in cash. As the assessee has failed to furnish the source of the amount of Rs. 13,20,00,000/- advanced as cash loans, the same has remained unexplained. A show cause notice dated 01.01.2022

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat was issued to the assessee mentioning above facts in the draft assessment order, to show cause why proposed variation should not be made as per the draft order. It was stated that in response to the aforesaid Show Cause notice dated 01.01.2022, the assessee furnished reply on 07.01.2022 repeating the points of objections to the initiation of proceeding u/s 147 of the I.T. Act, 1961 although the objections raised by the assesse had already been disposed off. It was held that the assessee failed to discharge the onus lying on him and thus failed to furnish anything substantial to explain the source of the amount of Rs. 13,20,00,000/- advanced as cash loans. In view of above facts and circumstances, the source of the amount of Rs.13,20,00,000/- advanced as cash loans by the assessee during the financially year 2011-12 has remained unexplained and accordingly the unaccounted loan amount of Rs. 13,20,00,000/- was treated as unexplained investments of the assessee u/s 69 of the I.T. Act, 1961 and added to his total income.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat to raise such allegations against the Appellant for such a huge and baseless figure of Rs. 13,20,00,000, allegedly provided as unaccounted loans to various other persons as per the purported statement of Sh. Ramesh Chand Maheshwari without first establishing the trustworthiness and credibility of such statements and without even confronting the said statement to the assessee.

“Section 69: Unexplained Investment 9. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the 53[Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.” 19. It was submitted that from the bare reading of the provision of Section 69 of the Act, it is evident that the said section could only be invoked under the circumstances where the Appellant has made an investment, source of which was not explained by him. In other words, the onus is on the Revenue to first establish that the Assessee has made some investment thereafter only then burden shifted to the Assessee for explaining the source of investment. The law that the onus is first on the Revenue to establish that the Assessee has made an investment is supported by the judicial precedents which are as follows:

a. Commissioner of Income-tax v. Gian Gupta [2014] 46 taxmann.com 372 (Delhi)

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat b. Ananthakrishna Vasudev Aithal v. Income-tax Officer, [2023] 147 taxmann.com 376 (Bangalore - Trib.)

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat

a. Shri Nischal Sethi v/s Income Tax Officer, Ward: 1(4), I.T.A No. 3086/Del/2015: b. Principal Commissioner of Income-tax v. Vinita Chaurasia [2023] 146 taxmann.com 9 (Delhi) c. Income-tax Officer v. Bharat A. Mehta [2015] 60 taxmann.com 31 (Gujarat). d. Pankaj Dahyabhaipatel Assistant (HUF) V. Commissioner of Income-Tax, [1999] 63 TTJ 790 (Ahd.)

 No exercise of independent examination of the contents of the excel sheets was done by the AO before arriving at the conclusion that code name "R. Karnawat" represents name of the Appellant.  No excel sheets shared with the Appellant.  The AO failed to corroborate the contents of the excel sheets with any other independent evidence.  No confirmation from the parties to whom it is alleged that the Appellant has given the loan is available or brought on record.  The AO relied on statement recorded in case of Ramesh Manihar Group, however, has not even cared to provide the copy of their statement and the opportunity of cross examination.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat found acceptable and it was held that the Assessing Officer was justified in treating the sum of Rs. 13,20,00,000/- as unexplained investment under section 69 of the Act as the appellant has failed to offer any satisfactory explanation regarding the nature and source of the said amount and the addition of Rs. 13,20,00,000/- was confirmed. Against the said order and findings of the ld CIT(A), the assessee is in appeal before us.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat exact same excel sheet columns headed "T", "@", "AT", "From", and "To" and the Tribunal categorically held that it is not discernible what kind and nature of transactions the data depicts because everything is in abbreviated form. The Tribunal explicitly ruled that it is entirely unclear "what 'T' stand for, what '@' stand for, what 'AT' stand for," and what the abbreviations in the "From" and "To" columns represent. The Tribunal deleted the entire addition of Rs. 25 Crores, categorically holding that: "the said data per se on a standalone basis cannot constitute as tangible and cogent material/evidence in possession of the Assessing officer unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee". It was submitted that in the present case, the mathematical extrapolation of the total of the "AT" column (aggregating to 370) to a whimsical sum of Rs. 13,20,00,000/- is completely devoid of any legal or factual basis and reflects a complete non-application of mind.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat present case, the AO has allegedly relied upon digital data/information allegedly found from the possession of a third party, but no certificate as contemplated under law has been brought on record to prove the source, authorship, integrity or genuineness of such electronic material. In the absence of such mandatory authentication, the alleged digital data/information lacks evidentiary value and could not have been relied upon against the Appellant, much less made the sole or substantive basis for assuming jurisdiction or sustaining the impugned additions.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat search cases. It was submitted that on the basis of the aforesaid investigation, information was forwarded by the ACIT, Central Circle-3, Jaipur to the jurisdictional Assessing Officer, wherein the name of the assessee was identified as one of the persons who had advanced unaccounted cash loans aggregating to Rs.13,20,00,000/- during the relevant financial year. It was submitted that based on this tangible material, reassessment proceedings were thereafter initiated after recording of reasons and during the course of reassessment proceedings, the assessee was specifically required to explain the source of the said cash loans and to substantiate that no such transactions had taken place. It was submitted that the assessee has primarily denied the transactions and has contended that the addition is based solely on third-party information, uncorroborated statements, and alleged excel sheets, without providing opportunity of cross-examination. It was submitted that the the seized data was not considered in isolation as the Investigation Wing carried out extensive analysis and corroboration with other seized materials, banking data, and statements recorded on oath under section 131 of the Act. The persons managing the Ramesh Manihar Group have categorically admitted that they acted as finance brokers for arranging cash loans between various parties, including the appellant. It was submitted that it is a settled position of law that where incriminating material is found during the course of search and such material clearly indicates involvement of an assessee in unaccounted transactions, the burden shifts upon the assessee to rebut the same with cogent evidence. In the present case, despite repeated opportunities, the appellant has failed to furnish any documentary evidence, books of account, cash flow statements, or any other material to demonstrate that no such cash loans were advanced or to explain the source thereof. The argument of the appellant that the name appearing in the seized material is not conclusively identifiable with him is also not acceptable. The Investigation Wing has clearly brought on record the identification of the

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat appellant through corroborative data and linkage analysis. Mere denial, without bringing any contrary evidence on record, cannot absolve the appellant from the consequences arising out of incriminating material found during search proceedings. As regards the contention relating to non-grant of cross- examination, it was submitted that the addition is not based solely on the statement of any single person but on a comprehensive set of seized digital evidence, analysis thereof, and corroborative material. In such circumstances, the absence of cross- examination does not vitiate the addition, particularly when the appellant has failed to discharge the primary onus cast upon him. It was accordingly submitted that the Assessing Officer was justified in treating the sum of Rs. 13,20,00,000/- as unexplained investment under section 69 of the Act as the appellant has failed to offer any satisfactory explanation regarding the nature and source of the said amount and the addition of Rs. 13,20,00,000/- was rightly confirmed by the ld CIT(A).

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat assessee and which has been advanced by the assessee by way of cash loans through Ramesh Manihar Group and the same was thus brought to tax. Besides, the interest on such money advanced by way of cash loans has been determined applying rate of interest of 12% and the same has also been brought to tax. 68. Here, first and formost issue that arise for consideration is regarding on whom the initial onus lies which needs to be discharged. Whether it is Revenue or the assessee who has to discharge the initial burden of proof that such unaccounted money belongs to the assessee and secondly, the same has been advanced by the assessee by way of cash loans through Ramesh Manihar Group to third parties and he has earned interest thereon and the same has remain unaccounted in the books of accounts. 70. The ld A/R in his submissions has however stated that the addition has been made by the Assessing officer by way of undisclosed investment in form of cash loans invoking the provisions of Section 69 and therefore, the burden lies on the Assessing officer to prove that the investment by way of cash loans has infact taken place and the amount so invested belongs to the assessee and the burden is on the Revenue to first prove the said allegations by leading positive evidence. In this regard, our reference was drawn to the provisions of Section 69 of the Act which reads as under: "Where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year." 71. On perusal of the aforesaid provisions, it is observed that it talks about a situation where in any financial year, the assessee has made investments which are not recorded in his books of accounts and in the instant case, whether the assessee has made investment by way of cash loans and whether the same has not been recorded in his books of accounts, it has to be determined by the Assessing officer and a finding is to be recorded bringing cogent evidence on record that money so invested belongs to the assessee and the same has been advanced by way of cash loans through Ramesh Manihar group. And once it is established that these two conditions are satisfied regarding money so invested belongs to the assessee and making investment by way of cash loans and not recording it in his books of accounts, in such a situation, an opportunity may be provided to the assessee calling for his explanation about the nature and source of such investment. And where either no explanation has been furnished by the assessee or the explanation so offered is not found satisfactory in the opinion of the Assessing officer, the said investment may be deemed to the income of the assessee for such financial year. Looking at it from another perspective, we find that where in response to show-cause notice, the assessee had catergorically denied making any such investment through Ramesh Manihar Group and then, in such a scenario, how can the assessee lead any evidence in support of a transaction which he denied having executed and undertaken at first place. Therefore, we agree with the contentions advanced by the ld A/R that the initial onus lies on the Assessing officer to establish through leading positive evidence that the assessee has infact invested the money by way of cash loans through Ramesh Manihar Group and therefore, we believe that merely stating that the same has not been recorded in the books of accounts so maintained by the

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat assessee is not sufficient enough to discharge the initial burden cast on the Assessing officer. 72. In order to determine whether the onus cast on the Assessing officer has been satisfied or not and basis of his findings, we refer to the information and other material/documentation available with the Assessing officer prior to initiation of the reassessment proceedings as well as analysis/examination thereof during the course of reassessment proceedings and besides, other information/documentation relied upon by the Assessing officer during the course of reassessment proceedings to arrive at his findings and which forms the basis of subject addition of undisclosed investment in the impugned order. These include information received from DCIT Central Circle-3 Jaipur prior to recording of reasons and issuance of notice u/s 148, copy of extracts of excel sheets/data found in 18 pen drives during the course of search u/s 132 from the premises of Shri Ramesh Manihar and relevant to the assessee, copy of statement of Shri Ramesh Chand Maheshwari alias Shri Ramesh Manihar recorded during the course of search u/s 132(4) dated 7.01.2016, copy of statement of Shri Ramesh Chand Maheswari alias Shri Ramesh Manihar subsequently recorded u/s 131 dated 8.11.2017. 73. Firstly, we refer to the information so received by the Assessing officer from DCIT Central Circle -3, Jaipur prior to recording of reasons and issuance of notice u/s 148, it talks in general about the search and seizure action u/s 132 carried out in case of Ramesh Manihar Group and during the course of search, voluminous data comprising of excel sheets in pen drives were seized from the office of this said group. It has been further stated that the said group was indulging in cash loan financing on a large scale and were engaged as finance brokers for arranging cash loans between various borrowers and lenders and the data so seized relate to such unrecorded cash transactions. Thereafter, talking specifically about the assessee, it has been stated in the said information that certain transactions have been noticed regarding the assessee, Shri Prakash Chand Kothari wherein the assessee has paid cash loans of Rs 25 crores to various persons through the said group and has earned interest on the said amount. If we look at the data so provided in form of a table in the information so received from DCIT Central Circle- 3 Jaipur and as recorded in the reasons by the Assessing officer, we find that it list down certain transactions on various dates and has various columns with heading "T", "@", "AT" and certain figures have been stated under each heading corresponding to various dates, and thereafter, has two columns with heading "from" and "TO" wherein under column "from", "PCK" has been stated and under column "TO", certain names again in abbreviated form has been stated. On perusal of the said data, it is not discernible as to what kind and nature of transactions the said data depicts as everything is in abbreviated form, what "T" stand for, what "@" stand for, what "AT" stand for, what "PCK" stand for, what is the linkage of "PCK" with other persons whose name are again written in abbreviated form, and how this data and so called transactions are related to the assessee and how the figures so depicted represent and add up to a figure of Rs 25 crores are again not discernable even from close reading of the said data and said data is unclear, vague and in abbreviated and codified form and therefore the said data per se on a standalone basis cannot constitute as tangible and cogent material/evidence in possession of the Assessing officer unless the same is analysed and examined thoroughly and necessary linkage is established with the assessee. 74. Now, let's look at as to how the Assessing officer has examined and analysed the said data further during the course of reassessment proceedings. The Assessing officer has referred to and compared the aforesaid data with data found in other pen drives as well as statements of Ramesh Chand Maheshwari recorded u/s 132(4) during the course of search and post search proceedings u/s 131 of

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat the Act given that the said data has been found in pen drives from the premises of Ramesh Manihar Group during the course of search. Apparently, the aforesaid data was found in pen drive "Jagat.xlsx" where name of lenders and borrowers were admittedly stated in code name or abbreviated form and it has been claimed by the Revenue that "PCK" stands for the assessee, Shri Prakash Chand Kothari. The said data was then compared with data in other pen drives namely "from and two group.xlsx", "copy of New Dir.xls", data in Ankoot file where name of Prakash Chand Kothari, KGK Jewellers, address and phone number has been stated and basis such exercise, the Assessing officer has reached the final conclusion and recorded a finding that "PCK" stands for the assessee, Shri Prakash Chand Kothari and the transactions stated in the first excel file so found in the pen drive "Jagat.xlsx" pertains to the assessee. The Assessing officer has further stated that on examination of these pen drives, it is found that the amount of transactions were mentioned after suppressing five zeros and different individual entries totaling to Rs 2500 actually means and reflect a total figure of Rs 25 crores. The Assessing officer has thereafter referred to the statement of Shri Ramesh Chand Maheshwari recorded u/s 132(4) during the course of search and in particular, question no. 16, 17, 18 and 19 and the response to the said questions submitted by Shri Ramesh Chand Maheshwari has been considered and reproduced in the reassessment order. The Assessing officer has also referred to the statement of Shri Ramesh Chand Maheshwari recorded u/s 131 during the course of his own assessment proceedings and also the application filed by his Ramesh Manihar Group before the Settlement Commission where they surrendered their commission income on such unrecorded and unaccounted transactions and due taxes have been paid. Basis the same, the AO has arrived at a finding that "PCK" stands for the assessee and he has also advanced cash loans worth Rs 25 crores through Shri Ramesh Manihar Group and has earned interest thereon which has been brought to tax. 75. In this regard, as we have noted earlier, the proceedings have been initiated under section 147 and not under section 153C as no satisfaction has been recorded by the Assessing officer of Ramesh Manihar Group that seized documents pertains to the assessee or any information contained therein relates to the assessee and the original seized pen drives found during the course of search have not been handed over to the Assessing officer by Assessing officer of the Ramesh Manihar Group. Therefore, what has been received by the Assessing officer in the instant case is only the information in form of extracts and print out of the excel sheets containing the aforesaid data in various pen drives found during the course of search in case of Ramesh Manihar Group. Here, it is relevant to note that presumption available under section 132(4A) in terms of authencity and correctness of contents of such data/information found in the pen drives can be drawn against the person in whose case the search has been authorized and from whose possession or control such pen drives have been found during the course of search. Therefore, in the instant case, the presumption lies against Ramesh Manihar Group, and not against the assessee. In such a case, the burden lies on the Assessing officer by leading corroborative evidence that the data/information so found in the pen drives relates to the cash loan transactions belongs to the assessee and the same have actually been undertaken by the assessee through Ramesh Manihar Group and the contents therein are found as correct and authentic and stand duly corroborated by independent evidences. 76. The assessee has also challenged the reliance on such extracts and print outs of the excel sheets stating that the AO has not complied with the provisions of section 65A and 65B of the Evidence Act, 1872 and no satisfaction has been recorded by the AO that the output of the pen drives/computer records were analysed on "as is" basis by the Department and there was no risk of the data

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat being tempered by anyone and which has been relied upon by the Assessing officer. In his submissions, the ld PCIT/D/R submitted that there is a well laid down procedure and protocols are strictly followed by the department regarding seized documents and it is unlikely that the search data can be tempered with by any officials of the Revenue department and once, the information has been received from another Assessing officer, there is a presumption that such data and information is shared on "as is" basis and therefore, where there is no basis for raising any suspicion in the mind of the Assessing officer, no further action has been taken regarding verifying the authencity of the data so received and recording any satisfaction in this regard. It was accordingly submitted that it is merely an apprehension on the part of the assessee and the same cannot be a basis for not relying on the data so collected and received by the Assessing officer and which forms part of the assessment records. 77. We find that though Evidence Act is not strictly applicable to the income tax proceedings, however the general principles so laid down therein can be applied by leading certain positive evidence which can authenticate the data which has changed hands apparently from the Investigation Wing to the Assessing officer of the searched person and then, finally to the Assessing officer who has placed reliance on the same and has passed the impugned order. It may be an apprehension on part of the assessee that the data while shared/handed over to the Assessing officer might have been either modified, altered or tempered with, however, where such an apprehension has been raised by the assessee and more so, it would also be interest of Revenue where there is heavy reliance placed by the Revenue on such data, such apprehension so raised by the assessee needs to be appropriately addressed by leading positive evidence and recording of satisfaction by the Assessing officer which we find has not happened in the instant case. 78. Having said that, let's examine whether data so found in the pen drives and received by the Assessing officer stand corroborated by the Shri Ramesh Chand Maheshwari in his statement recorded under Section 132(4) at the time of search conducted on 27.01.2016. In reply to question no. 12, he has stated that through his two firms, namely Amarnath Associates and Amarnath Enterprises, loan financing through cheque/RTGS has been undertaken on commission basis and in reply to question no. 15, he has stated that cash loan financing is done jointly with Manmohan Bagla in their private capacity and his companies/firms have no relationship with such cash loan transactions. In reply to question no. 16, he has further stated that whatever amount was given as cash loans was his's and Manmohan Bangla's own money which was given on interest and which on receipt, is further given on interest to various parties. Thereafter, in subsequent questions, he has explained since how long these cash loan transactions have been undertaken by them and how the accounts are maintained which has been stated by him to be maintained on computer, pen drives and slips which remains in his possession. Further, questions no. 30 and 31 were asked specifically about the pen drives and the data so found in the pen drives and we deem it appropriate to reproduce the same as under: “प्रश्न 30 तल़ािी के दौऱान आपके केबबन से 18 पैन ड्ऱाईव्स शमल है जो कक AS Exh-1 से AS Exh.18 तक अंककत की गई है/ इन PEN Drives में कई Excel Files जैसे कक उद़ाहरण के तौर पर A44xX.AS Exh.1 File name NOV JAGAT, Annex. AS Exh. 2 File name AT-UPT030-NOV FOR UPDATE व Annex. AS Exh.8 File name AX-UPTO 30- NOV FOR UPDATE प़ाई गई है/ उपरोकत शलखीत तीनों EXCEL Files के पप्रंर्ट आउर्टस

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat उद़ाहरण के तौर आपको ददख़ाए ज़ा रहे है। कृपय़ा इनमें अंककत ENTRIES को पवस्त्त़ार पूवजक समझ़ाइए? उतर मैनें उपरोक्त तीनों EXCEL ि़ाईलों के पप्रंर्ट आउर्टस देख शलए है। इनमें दजज प्रपवजठियों की ज़ानक़ार मैं पूवज में पूछे गए प्र.संख्य़ा 20,21,22,23,24,25 व 26 के उतर में पहले ह बत़ा चुक़ा हूूँ। यह सभी transactioons एक ह प्रकृतत के है और कैि लोन के लेन देन से संबंधधत है और इनमें अंककत ऱाशिय़ाूँ 1000/- के रूप में है जैसे 50 क़ा मतलब 50,000/- रूपये 200 क़ा मतलब 2,00,000/- रूपये है। अतः मेऱा जब़ाब उपरोक्त प्र. के उतरों (20 से 26 तक) जैस़ा ह म़ाऩा और समझ़ा ज़ावें। और सभी 18 PAN DRIVES में एक ह प्रक़ार ह य़ानी कैि लोन की प्रपवजठर्टय़ाूँ दजज है। प्रश्न 31 आपके द्व़ाऱा कैि लोन के लेन-देन से संबंधधत सभी दस्त्त़ावेजों में अंककत दजज पवशभन्न ऩाम जजनमें से कुछ कोर् भ़ाष़ा में भी है, यह बत़ाय़ा गय़ा है कक यह लोग छोर्टे-मोर्टे पवक्रेत़ा/य़ा व्य़ाप़ार है। इस संबंध में आपको बत़ाय़ा ज़ात़ा है कक आपके OFFICE जो कक 203, रतऩास़ागर, जौहर ब़ाज़ार जयपुर में जस्त्र्थत है, वह़ाूँ से सवे की क़ायजव़ाह के दौऱान ररसेप्ितनठर्ट (Receptionist) के कम्पयूर्टर से एक Excel ि़ाईल शमल है जजसमें कक कई व्य़ाप़ाररयों के ऩाम व पते शलखे गए है। यह ि़ाईल "copy of New Update 2015 Neha के ऩाम से शमल है। इस ि़ाईल में शलखे हुए ऩाम और आपके कैि लोन से संबंधधत बऱामद दस्त्त़ावेजों Annex. AS. Exh.1 से 18 और Exh.20 इत्य़ादद में शलखे हुए ऩामों से शमलते है और ऐस़ा लगत़ा है कक एक ह व्यजक्त क़ा ऩाम सभी कैि लोन से संबंधधत दस्त्त़ावेजों में दजज है। उद़ाहरण के तौर पर.. इसी तरह से आपको कई उद़ाहरण ददख़ाए ज़ा रहे है। इस ब़ारे में कृपय़ा अपनी दर्टप्पणी द जजए ? उतर 31 यह एक महज इतेि़ाक है। Receptionist के computer की ि़ाईल में अंककत ऩाम व पते Greeting Card, Invitation Card वगैरह भेजने के शलए शलखे गए है। इनक़ा व्य़ाप़ार व Account से कोई संबंध नह है। 79. As noted above, in reply to Q. No. 30 & 31, he stated that all these transactions found in the pen drives are of similar nature and pertains to cash loan transactions. Further, regarding names in code word and names as found in various pen drives/excel files found in the receptionist's computer, he has stated that the name and address so found in excel files in the receptionist computer was prepared for the purpose of sending greetings/invitation cards and has no linkage with the accounts and business dealing. Finally, in reply to Q. No. 36, we find that he has put forth his willingness to surrender the undisclosed investment in the form of cash loans and also the incidental interest income as part of his income. We therefore find that in his statement recorded u/s 132(4), Shri Ramesh Chand Maheshwari has talked about loan financing through formal banking channels and loan financing in form of cash. As far as loan financing in cash is concerned which is under examination before us, the Investigation officer has asked him series of questions and confronted him with the pen drives so seized during the

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat course of search and Shri Ramesh Chand Maheshwari has stated clearly and consistently that loan financing has been done jointly with Manmohan Bangla in their personal capacity where their own money is lent on interest to various parties from time to time and has explained the modalities of such cash financing and how the accounts thereof are maintained in computers and pen drives. Therefore, we are unable to understand as to how the Assessing officer has reached to a conclusion that basis such statement recorded u/s 132(4), which has also been reproduced in the assessment order and relied upon by him, that Shri Ramesh Chand Maheshwari and his partner Shri Manmohan Bagla were involved in cash loan transactions where the amounts were taken in cash from the lenders and the same was advanced to the borrowers in cash and have earned commission income on these transactions, and has recorded a consequential finding that since name of "PCK" is found in the excel sheets, it represent the assessee only and the assessee also made his transactions of lending unaccounted money through the said group and earned interest income thereon. We therefore find that there is a clear disconnect between the findings of the AO and the statement of Ramesh Chand Maheshwari recorded on oath u/s 132(4) of the Act, and data so found in the pen drives which is claimed by the AO as relating to cash loan financing by the assessee through Ramesh Manihar cannot be held to be corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 132(4) of the Act. 80. Now, coming to the another statement of Shri Ramesh Chand Maheshwari recorded under Section 131 on 8.11.2017 which has been relied upon by the Assessing officer and we refer to response of Shri Ramesh Chand Maheshwari in response to various questions. We find that in this statement recorded u/s 131 on 8.11.2017, after a gap of almost 21 months from the earlier statement which was recorded u/s 132(4) on 27.01.2016, when Shri Ramesh Chand Maheshwari was confronted with his earlier response to question no. 15 in statement recorded u/s 132(4), there has been a change in his stand where he stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement where he had stated in response to question no. 15 that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and in reply to question no. 16, he has stated that whatever amount was given as cash loans was his and Manmohan Bangla's own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change in stand of Shri Ramesh Chand Maheshwari where even in respect of cash loan financing, he has stated that he acts as a mediator and facilitator between the lenders and borrowers and thus earns commission income instead of interest income on amount advanced in their personal capacity as stated earlier. Basis such statement and filing of petition before the Settlement Commission where these cash loan financing transactions have been claimed and shown as transactions undertaken by Shri Ramesh Chand Maheshwari on commission basis, the AO has taken cognizance of the same and held that since name of "PCK" is found in the excel sheets, it represents the assessee only and the assessee also made his transactions of lending unaccounted money through the said group and earned interest income thereon. We therefore find that there is a total disconnect and variance between the two statements and change of stand of Shri Ramesh Chand Maheshwari in his statement recorded u/s 132(4) and the statement subsequently recorded u/s 131 of the Act after a gap of almost 21 months and the Assessing officer in the instant case has effectively placed reliance on the subsequent statement recorded u/s 131 ignoring the earlier statement recorded u/s 132(4) of the Act.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 81. Without getting into the background and basis of such change in stand of Shri Ramesh Chand Maheshwari which is a matter for Revenue and appropriate authorities to ponder and examine, and is in any case beyond the scope of impugned matter under consideration, the question that arises for consideration is whether the Assessing officer can be held justified in placing reliance on such shifting stand of Shri Ramesh Chand Maheshwari in his own two statements which put a question mark on reliability of his statements and can it be said that the data so found in the pen drives relates to cash loan financing of various lenders stand corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 131 of the Act. The assessee has also challenged the same stating that such statement was never confronted to him during the course of reassessment proceedings and even an opportunity of cross-examination of Shri Ramesh Chand Maheshwari so demanded was not provided to him. 82. To our mind, in the facts of the present case, where there is shifting stand of Shri Ramesh Chand Maheshwari in his two statements and there is heavy reliance placed by the Revenue on the latter statement recorded u/s 131, it is imperative that the assessee be allowed an opportunity to seek a copy of the said statement and file his objections and secondly and equally important, an opportunity to cross examine Shri Ramesh Chand Maheshwari which has been recognized time and time by the Courts as an important facet through which the principle of natural justice can be implemented and is duly supported by various authorities quoted at the Bar. In absence of such an opportunity, no reliance can be placed on such statement more so where in his statement, Shri Ramesh Chand Maheshwari did not categorically referred the name of the assessee or that the assessee provided cash loans through his Group to different persons. Therefore, the finding of the AO that data so found in the pen drives relates to cash loan financing by the assessee through Ramesh Chand Maheshwari stand corroborated by the statement of Shri Ramesh Chand Maheshwari recorded under Section 131 of the Act cannot be accepted. 83. Further, the Id AR has stated at the Bar that even before the settlement Commission, Shri Ramesh Chand Maheshwari has not given any names and identity of the lenders and borrowers and any admission of the Ramesh Chand Maheshwari before the Settlement Commission therefore doesn't establishes that PCK is no one else but the assessee, Shri Prakash Chand Kothari. In view of what we have found and stated earlier, we are not persuaded by the findings of the Assessing officer that merely because Shri Ramesh Chand Maheshwari and his Group has filed an application before the Settlement Commission where they have surrendered their commission income on such unrecorded and unaccounted cash loan financing transactions and due taxes have been paid, the same should by default form the basis for determining the nature and character of transactions by way of cash loans in the hands of the assessee routed through Ramesh Manihar Group as the said admission is a unilateral admission on part of Ramesh Chand Maheshwari and the assessee cannot be compelled to accept the same in absence of any clinching and irrefutable evidence that the money has infact been paid by the assessee and routed through Ramesh Manihar Group for onward lending and without providing an opportunity of cross-examination. The assessee is not privy to the application filed before the Settlement Commission and proceedings before the Settlement Commission and therefore, the findings of the Settlement Commission cannot be said to bind the assessee and for that matter, the Assessing officer who has to record his own independent findings considering the facts and circumstances of the present case. We therefore agree with the findings of the Id CIT(A) that mere admission by one person before the Settlement Commission cannot bind the another person in absence of any nexus between the person admitting and the other person.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 85. We therefore find that the Assessing officer has merely relied upon extracts of certain uncorroborated excel sheets, found during the course of search in case of Ramesh Manihar Group. Such excelsheets do not point out to the fact of assessee having given loans, in cash, to different persons through Ramesh Manihar Group. Nothing concrete is discernible from these excel sheets. The Assessing officer has failed to corroborate the excel sheets with independent evidences. Unless such corroborative evidences were brought on record, the present additions are not justified. Nowhere in the excelsheets found during the course of search in case of Ramesh Manihar Group and relied upon by the AO, it could be established that "PCK" as mentioned in those documents stand for the assessee only. No trail of documents or corroborative evidences could be established in this regard. The extracts of the excel sheets on which reliance had been placed were found from the computers of employees of Shri Ramesh Manihar. Those employees were never examined independently by the AO to find out whether "PCK" as mentioned in such excel sheets represent assessee only. There is no positive confirmation or concrete evidence available with the AO, in the form of acceptance by the parties alleged to have received loans that they have actually received loans, in cash, which was provided by the assessee through Ramesh Manihar Group. Leaving aside a positive confirmation from the recipients of the loan, the AO has not been able to establish even the identity of the persons alleged to have received loans from the assessee. There is shifting stand of Shri Ramesh Chand Maheshwari in his two statements recorded u/s 132(4) and u/s 131 of the Act. We find that in his latter statement recorded u/s 131, he has stated that cash loan financing is undertaken in their personal capacity where they acted as a mediator/facilitator. This is unlike his earlier statement u/s 132(4) where he had stated that cash loan financing is done jointly with Manmohan Bagla in their personal capacity and whatever amount was given as cash loans was his and Manmohan Bangla's own money which is given on interest and which on receipt, is again given on interest. We therefore find that there has been a change in stand of Shri Ramesh Chand Maheshwari where even in respect of cash loan financing, he has stated that he acts as a mediator and facilitator between the lenders and borrowers and thus earns commission income instead of interest income on amount advanced in their personal capacity as stated earlier. Even no question was even put to Shri Ramesh Chand Maheshwari as to what "PCK" stand for and there is no response by him either in his entire statement which suggests that the assessee has advanced cash loan through him. Therefore, the data so found in the excel sheets doesn't stand corroborated by his statements as well. Even where the AO wishes to place reliance on such statement, no opportunity of cross examining Shri Ramesh Chand Maheshwari was provided to the assessee inspite of specific request made by the assessee during the course of assessment proceedings. The Id CIT(A) has rightly held that relying upon the statement and not providing cross examination to find out any involvement of the person affected by such statement is a gross violation of principles of natural justice which renders such reliance a nullity and if such statement is discarded, there remain no evidence to hold that the appellant has given any such advance to the tune of Rs. 25 crores. Merely extracts of excel sheet do not provide any evidence of the allegation made by the AO against the assessee. Thus, mere fact that there were certain entries found from record of third party is not sufficient to make addition on the ground that assessee had made unexplained investments. The Id CIT(A) has rightly held that though cognizance may be taken in respect of entries by third-party in the assessment of other person so as to initiate inquiry for assessment, yet when there is no finding that such entries are in fact pertaining to such third person only which should be emanating from the entries itself or from the person who has recorded such entry, no cognizance can be taken so as to fasten tax liability on such third person.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 89. In light of aforesaid discussions and following the decisions cited supra, we are of the considered view that in the peculiar facts and circumstances of the case present case, there is no basis for making the addition in the hands of the assessee of Rs. 25,00,00,000/- made on account of cash loans and consequent interest charged thereon amounting to Rs. 90,58,625/- and for the reasons cited supra, we affirm the findings of the ld CIT(A) deleting the said additions. We make it clear that our findings are based on appreciation of peculiar facts and circumstances of the present case and therefore should not be taken as binding precedent in other cases which need to be examined in light of respective facts and circumstances. The grounds of appeal no 1-3 taken by the Revenue are thus dismissed.” 31. In the aforesaid case, the Coordinate Bench framed the core issue in terms of initial onus to be discharged – whether by the Revenue or by the assessee and as the addition was made under Section 69 (unexplained investment), the Bench held that the burden lies on the Revenue and not on the assessee to first establish through positive evidence that the investment was actually made and belonged to the assessee especially since the assessee had categorically denied the transactions from the outset. The Bench thereafter scrutinized each piece of evidence the AO relied upon. The raw data from pen drives (coded entries like "PCK") was found too vague, abbreviated, and uncorroborated on its own to constitute tangible material and the said material was held as merely secondary extracts, not primary seized records, weakening its evidentiary value and the AO failed to comply with Sections 65A/65B of the Evidence Act regarding authentication of electronic records. Further, referring to Ramesh Chand Maheshwari's two statements initially u/s 132(4) and thereafter u/s 131, the Coordinate Bench held the same to be contradictory as in the first statements, he talked about personal cash lending alongwith Manmohan Bagla and in the second statement, he recasted him as a mere "mediator/facilitator." and in neither of the two statements, he identified "PCK" as the assessee, nor did investigators ever ask him what "PCK" meant. Further, the Coordinate Bench held that filing application by Ramesh Manihar before the Settlement Commission was a unilateral admission that could not bind the assessee absent corroborative nexus, and in absence of no cross-examination opportunity

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat provided to the assessee despite specific requests resulting in violation of principal of natural justice. The Coordinate Bench relied on several other Coordinate Benches and High Court decisions with similar fact patterns (third-party pen drives/diaries with coded names) such as case of Anil Jaggi, Katrina Rosemary Turcotte, Aarti Colonizer Company, and Mahabir Prasad Gupta and in all these cases, it was held that uncorroborated third-party electronic/documentary entries, without independent verification linking them conclusively to the assessee, cannot sustain additions. The Coordinate Bench thereafter finally found no basis for the addition, holding that the Revenue failed to discharge its burden of proving the transactions belonged to the assessee and affirmed the findings of the ld CIT(A) and the Revenue’s appeal was dismissed.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat particulars of the persons to whom the loan was advanced by the assessee in terms of their name, addresses, PAN number, email IDs, etc. The said information has been asked not once, but twice, which shows that the identity and particulars of the alleged borrowers were even not in possession of the Assessing officer and therefore, question of further examination and validation also doesn’t arise for consideration and thus, not carried out by the Assessing officer.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat the investigation wing, wherein the persons of Ramesh Manihar Group were found to be engaged as finance brokers for arranging cash loans between various borrowers and lenders which were not reflected in the books of accounts and the brokerage received for such unrecorded cash transaction was also not offered for taxation by the group. In para 2.2, it was stated that the figures in the aforesaid data was suppressed by five zeros, as corroborated from entries found in Excel sheets with documents seized during the course of search action in other cases and it talks about certain supplementary report of DDIT Investigation-2, Jaipur, and based on that investigation, it has been stated that the identities of numbers of lenders whose names are recorded in the said data was also determined. It was further stated that such corroboration of entries was done through various means, primarily from other Excel sheets containing the details of loans arranged through cheque/banking channels, and such Excel sheets were also found to be in similar format as that of Excel sheets containing the details of the cash loans. It has been further stated that data of lenders maintained on the computer of receptionist at their office, contacts stored in mobile phone, etc., were also used to ascertain the complete details of name and address of the lenders, and from such data, PAN numbers of the lenders were retrieved. Again, there is a reference to detailed discussion in the supplementary report. Further, it talks about the statement of Shri Ramesh Manihar and Shri Manmohan Krishna Bagla recorded under section 131 and thereafter, in para 2.3, it has given extract of certain Excel sheets which has been found and thereafter, towards the end, it says that the assessee has advanced unaccounted loan in cash totalling Rs. 13,20,00,000/- through Ramesh Manihar Group and basis that information, the Assessing Officer has reopened and thereafter concluded the reassessment proceedings.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat Officer in the entirety of the assessment order as we have seen above. Therefore, as to what is contained in that supplementary report is clearly not discernible from the records. Secondly, there is nothing on record in terms of loans advanced by the assessee through cheques/banking channels, and therefore, the corroboration which has been referred to is not in the context of the assessee. Further, in the statement so referred under section 131, we find that there is nothing which has been stated by Shri Ramesh Manihar in terms of involvement of the assessee and infact, he has shown his inability to identify the name of the lenders and the borrowers to whom the money has been lent or borrowed. Further, the extract of the excel sheet so referred is clearly in an abbreviated form, and other than reference of R Karnawat, which the Assessing Officer has held to be the name of the assessee and contested by the assessee, there is nothing which is discernible from the said excel sheet, and we find that it is in the same format and template which has been referred in case of Prakash Chand Kothari (supra) matter that we have referred above, and where the Coordinate Bench has clearly held that that such raw data, so extracted from the pen drives, were too vague, abbreviated and uncorroborated, which weakens its evidentiary value, especially on account of lack of the authentication of the electronic records. Further, we find that how the AO has arrived at the figure of Rs. 13,20,00,000/- is beyond any comprehension. There is no working which has been done by the Assessing Officer on basis of which the said amount has been derived by the Assessing Officer. Therefore, merely the fact that the information has been shared by the ACIT, Central Circle, Jaipur, the Assessing Officer, without any further investigation and examination thereof, and without bringing any corroborative evidence on record, has brought the said sum to tax in the hands of the assessee.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat assessee has lent certain amount and that too in form of cash loans, there is clearly no nexus/linkage which has been established with the assessee, the persons at whose premises the data/information has been seized has not named the assessee, the statements so recorded have not been shared with the assessee, the name of alleged borrowers are not available on record and therefore, mere fact that certain data has been found and extracted in search carried out at a third party premises which remain uncorroborated, the addition has been done in the hands of the assessee which by any stretch of imagination cannot be sustained in the hands of the assessee.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 41. In this regard, briefly, the facts of the case are that during the course of reassessment proceedings, the assessee was asked to furnish party- wise receipt of interest income in tabular format giving name of institution/person, nature, date and amount of investments and the interest earned thereon during the financial year 2011-12. In response to the aforesaid notice u/s 142(1), the assessee furnished the breakup of total interest income of Rs.28,19,981/- disclosed in the Return of income furnished for A.Y. 2012-13, as income from Other sources. The Assessing officer however, observed that as per the Form 26AS, gross amount of Rs.40,90,924/- has been credited to the assessee, as interest income from which TDS has been done u/s 194A of the I.T. Act, 1961 by banks /other persons and on comparison of the breakup of interest income furnished by the assessee, with data available in the Form 26AS for the A.Y. 2012-13, it was observed that the assessee has failed to disclose the interest income to the extent of Rs.14,14,627/- received from ICICI bank and Bank of India and a show cause notice dated 01.01.2022 was issued to the assessee to show cause as to why proposed variation should not be made. In response, the assessee submitted that the interest from Bank of India is offered to tax by the assessee at Rs.12,72,142/-, which is more than the amount of Rs.9,95,990/- reflected in 26AS (annexure C). Similarly, the interest from ICICI bank is offered to tax by the assessee at 7,13,989/- as against Rs.7,04,389/- reflected in 26AS. The submissions so filed by the assessee was found not acceptable as the AO held that the 26AS data as per available record does not match with what has been stated by the assessee and the "annexure C (26AS)" as mentioned by the assessee in his reply dated 07.01.2022, has not been enclosed/furnished. Further, the extra interest income from bank shown by the assessee as per his reply has also remained unexplained. In views of above, Rs.14,14,627/- was treated as undisclosed interest income of the assessee and added to the total income for the A.Y. 2012-13.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 42. The assessee thereafter carried the matter in appeal before the ld. CIT(A). It was submitted that the appellant filed his return of income for the year under consideration i.e., AY 2012-13 declaring total income of Rs. 33,31,497/- wherein the appellant had duly declared the details of interest income. The AO has alleged that as per Form No. 26AS, the interest income of the appellant was Rs. 34,00,758/-, which is factually incorrect and an obvious mistake apparent from record, as from a bare perusal of the appellant's Form No. 26AS for AY 2012-13, it is evident that there is no interest income of Rs. 34,00,758/- as alleged in the impugned Order. It was submitted that the impugned addition of Rs. 14,14,627/- on account of alleged undisclosed interest income is baseless and incorrect factual position as there is no undisclosed income of Rs. 14,14,627/- as such. The AO had perhaps placed reliance on wrong information of Form-26AS in the impugned Order, which even is not confronted with the appellant. And a comparison table of interest income as per Form 26AS downloaded from traces portal, as shown in returned income and interest income as per impugned order was submitted and the contents thereof read as follows: -

Interest Total Income as Amount Interest per AO order Name of TAN of Paid/ Income as on the basis TDS deductor deductor credited as per return of of unrelated per Form income Form No. NO. 26AS 26AS

Bank of MUMB12241F 9,95,990 12,72,142 19,91,980 99,600 India

ICICI Bank MUMT03361B 7,04,389 7,13,389 14,08,778 70,439

17,00,379 19,25,531 34,00,758

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat offered to tax by the appellant at 7,13,989/- as against Rs. 7,04,389/- reflected in 26AS. The appellant is unable to understand the discrepancy stated by the Ld. AO as regards to the taxability of the above interest incomes since the same have already been offered to tax as is also evident from the attached Form 26AS. Furthermore, since no basis as well as details of alleged interest income of Rs. 34,00,758/- has been given in the impugned Assessment Order, therefore, it is specifically denied that Appellant earned any alleged total interest income of Rs. 34,00,758/-. It was clear from the above table that, Appellant has disclosed the interest income more than the income as per Form 26AS and there is no undisclosed interest income as alleged in assessment order, whereas in the impugned Order wrong and unverified data of Form 26AS has been relied upon. Accordingly, wrong details/data of interest income reported, cannot be the basis of making impugned addition. It is clarified that Form 26AS is a document duly available during assessment proceedings as it is available in department portal itself, which is accessible on income tax portal itself. In view of the above, it was submitted that the impugned addition of Rs.14,14,627/- be deleted.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat Rs. 14,14,627/- made by the AO on account of alleged undisclosed interest income is completely baseless, factually incorrect, and stems from an obvious, unconfronted 26AS or information, which allegedly reflected higher income as per the version of the Ld. AO. It was submitted that the AO alleged that as per Form 26AS, the total interest income credited to the appellant was Rs. 40,90,924/-, out of which an amount of Rs. 14,14,627/- pertaining to ICICI Bank and Bank of India was supposedly undisclosed. It was submitted that this assumption is factually flawed as a bare perusal of the actual Form 26AS (updated till 04.01.2022) available on the Department's own TRACES portal clearly demonstrates that no such inflated interest amounts exist. It was submitted that in the original return of income filed for AY 2012-13, the Appellant duly declared a total interest income of Rs. 28,19,981/-, which included the interest received from Bank of India and ICICI Bank. The true factual position, contrasting the actual Form 26AS with the Income Tax Return (ITR) and the Ld. AO's erroneous assertions, is summarized below:

Interest Interest Income Interest Name of TAN of Income as per wrongly Income offered Deductor Deductor Actual Form assumed by to tax in ITR 26AS AO without any basis

Bank of MUMB12241F 9,95,990/- 12,72,142/- 19,91,980/- India

ICICI Bank MUMT03361B 7,04,389/- 7,13,989/- 14,08,778/-

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat ICICI Bank (Rs. 7,13,989/-) is more than the amount reflected in Form 26AS (Rs. 7,04,389/-). There is no documentary evidence on record to prove the interest income of Rs. 19,91,980/- or Rs. 14,08,778/- as claimed by the AO. There is no proof of the same and nothing has been confronted with the Assessee in this regard. It was submitted that the AO made the impugned addition relying on unverified data which is factually incorrect and without any basis. Since the Appellant has already offered interest income that exceeds the actual amount reflected in the statutory Form 26AS, there is absolutely no escapement of income and the addition so made and summarily upheld by the ld CIT(A) be deleted.

ITA No. 580/Mum/2026; A.Y. 2012-13 Rajendra Singh Karnawat 50. In view of the aforesaid discussions, where we have decided the matter on the merits of the case and the additions so made by the AO and sustained by the ld CIT(A) are deleted, the other grounds of appeal challenging the legality of the reassessment proceedings and assumption of jurisdiction by the AO u/s 147 of the Act have become academic in nature and are dismissed as infructuous.

Order pronounced in the Open Court on 21.09.2026

Sd/- Sd/- SIDDHARTHA NAUTIYAL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 21.09.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

By Order

Dy./Asst. Registrar I.T.A.T, Mumbai