PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL II vs. PURUSHOTTAM LAL SONI

The present appeals under Section 260A of the Income-tax Act, 1961 have been filed by the Revenue against the order dated 17.12.2025 passed by the ITAT pertaining to AY 2011-12 to 2017-18, whereby, although the ITAT upheld the findings of the Assessing Officer (AO) and the CIT(A) to the extent that the unexplained cash payments, cash receipts, unsecured loans and commission were based on the corresponding electronic data seized from the assessee‟s premises during the search, however, while accepting these findings, the ITAT modified the quantum of the additions, holding that the assessee appeared to have carried out an accommodation- entries and ,therefore, directed that the relevant additions be assessed at a lump-sum at rate of 8% . The ITAT further confirmed remaining additions made in all the appeals under specific heads and further directed the Assesse/Respondent to be assessed afresh after granting telescopic benefit to avoid double addition.

In the present Appeals, the Revenue has challenged the said reduction ITA 764/2026 etc. on the ground that the additions were based on specific incriminating material and that there was no evidentiary or statutory basis for adopting an ad-hoc 8% rate or for granting telescopic benefit without establishing a nexus or rotation of the unexplained funds.

The facts, in brief, leading to the present Appeals, are as under: a) It is stated that a search and seizure operation under Section 132 of the Income-tax Act, 1961 was conducted by the Department on 16.12.2016 at various business and residential premises of the Purushottam Lal Soni Group (hereinafter referred to as the „Assessee Group‟). It is stated that during the course of the search, various incriminating papers, documents and electronic data relating to the assessee were found and seized, including Tally records maintained on more than one computer. b) It is sated that upon examination of the seized material and recording of satisfaction a Notice under Section 153A was issued to the Assessee on 24.10.2017. In response thereto, the Assessee, vide letter dated 15.05.2018, requested that the original return filed under Section 139 be treated as the return filed pursuant to the notice under Section 153A. Thereafter, notice under Section 143(2) was served upon the assessee on 09.10.2018. c) It is stated that during the assessment proceedings, notices under Section 142(1) and summons under Section 131 were issued to the Assessee. ITA 764/2026 etc. d) It is stated that on examination of the seized Tally data, the Assessing Officer found that records were maintained on multiple computers and that the entries therein were different from each other. It is stated that several transactions could not be verified with the regular books of account on account of the Assessee‟s non-compliance with the summons and failure to furnish the requisite details. e) On examination of the seized material, the Assessing Officer found unrecorded cash payments and unrecorded cash receipts pertaining to the relevant financial year. The Assessing Officer further found unsecured loans amounting to Rs.1,70,54,600/-, in respect of which the identity, creditworthiness and genuineness of the lenders/transactions were not established, and accordingly treated the same as unexplained under Section 68 of the IT Act. The Assessing Officer also estimated 2% commission amounting to Rs.3,41,092/- in respect of the alleged accommodation entries. f) Accordingly, the Assessing Officer passed the assessment order dated 31.12.2019 under Section 153A read with Section 143(3) of the Act, determining the total income of the assessee at Rs.2,06,94,61,312/-, as against the returned income of Rs.1,24,47,323/-. The additions comprised Rs.14,44,77,515/- towards unexplained cash payments, Rs.1,89,51,40,780/- towards unexplained cash receipts, Rs.1,70,54,600/- towards unexplained unsecured loans and Rs.3,41,092/- towards commission on the unsecured loans. ITA 764/2026 etc. g) Aggrieved by the assessment order dated 31.12.2019, the assessee preferred an appeal before the CIT(A), New Delhi. The CIT(A), vide order dated 27.01.2025, dismissed the appeal and confirmed all the additions made by the Assessing Officer. The CIT(A) noted that a large number of incriminating documents/data had been found during the search and that the assessee was maintaining different data on different computers on a particular date. The CIT(A) further recorded that the assessment order had examined the evidence gathered from the seized material and that the assessee had failed to furnish any plausible explanation or cogent evidence in rebuttal. The CIT(A) accordingly found no reason to interfere with the additions of Rs.14,44,77,515/-, Rs.1,89,51,40,780/-, Rs.1,70,54,600/- and Rs.3,41,092/- made by the Assessing Officer towards unexplained cash payments, unexplained cash receipts, unsecured loans and commission on unsecured loans, respectively. The CIT(A) also rejected the assessee‟s objections concerning the alleged absence of incriminating material, non- compliance with Section 65B of the Indian Evidence Act, violation of principles of natural justice and limitation under Section 153B of the Act. h) Aggrieved by the order dated 27.01.2025 of the CIT(A), the assessee preferred an appeal before the ITAT, Delhi Bench „E‟. The ITAT, vide its order dated 17.12.2025 rejected the assessee‟s objections relating to the seized electronic data, Section 65B of the Evidence Act, violation of principles of ITA 764/2026 etc. natural justice and limitation, and held that the additions relating to unexplained cash payments, cash receipts, unsecured loans and commission were indeed based upon the corresponding electronic data seized from the assessee‟s premises during the search. However, while dealing with the quantification of the additions, the ITAT observed that the assessee appeared to have carried out an accommodation-entry business by receiving and paying cash amounts at some commission rate and that there was no evidence indicating a specified commission income or comparable instances in the relevant segment. In these circumstances, and “in the larger interest of justice”, the ITAT directed that the additions relating to unexplained cash payments, unexplained receipts, unsecured loans and commission component be assessed at a lump-sum rate of 8%, with the specific observation that such estimation should not be treated as a precedent. The ITAT further directed that, in the consequential computation, only the Section 68 additions etc. were to be assessed at 8%, while the remaining additions made under other specific heads were confirmed. At the same time, the assessee was directed to be assessed afresh after granting “telescopic” benefit as per law so as to avoid any double addition. Relevant portion of the said Order reads as under:

We further make it clear before parting as a matter of abundant caution that the learned Assessing Officer(s)‟ consequential computation shall ensure that only section 68 additions etc. shall be assessed @ 8%. All remaining additions in this entire batch of appeals made under other specific heads are hereby confirmed; and, at the same time, the assessee is directed to be assessed afresh after granting “telescopic” benefit to be considered as per law so as to avoid any double addition(s). Same order to follow in the assessee‟s remaining six appeals ITA Nos. ITA Nos. 3510 to 3515/Del/2025.” i) The Revenue has consequently filed the present appeals under Section 260A of the Income-tax Act, 1961 before this Court challenging the ITAT‟s order dated 17.12.2025. j) It is pertinent to mention that the Assessee has also challenged the ITAT‟s order dated 17.12.2025 by filing a separate set of Appeals under Section 260A of the Income-Tax Act. The said Appeals will be dealt with separately. ITA 764/2026 etc.

Essentially, the appeals are directed against the ITAT‟s reduction of the additions made by the Assessing Officer. The Assessing Officer, on the basis of seized electronic/Tally data, had made additions of Rs.14.44 crore towards unexplained cash payments, Rs.189.51 crore towards unexplained cash receipts, Rs.1.70 crore towards unexplained unsecured loans and Rs.3.41 lakh towards commission. The CIT(A) confirmed these additions. The ITAT also accepted that the impugned transactions were based on the electronic data seized during the search and rejected the assessee‟s objections regarding the seized material, Section 65B, natural justice and limitation. However, while dealing with the quantification, the ITAT held that the assessee appeared to be engaged in accommodation-entry business and directed that the relevant additions be assessed at a lump-sum rate of 8%, besides granting telescopic benefit to avoid double addition.

Accordingly, the following questions of law arises for consideration in the present Appeals: A. Whether, in the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in restricting the additions arising from unexplained cash payments, unexplained cash receipts and unexplained credits/unsecured loans to a lump-sum rate of 8%, after having itself upheld the findings of the Assessing Officer and the CIT(A) that the said additions were based upon specific electronic data and other incriminating material seized during the course of search under Section 132 of the Income-tax Act, 1961? B. Whether the ITAT was justified in law in treating the entire ITA 764/2026 etc. unexplained cash payments, unexplained cash receipts and unsecured loans as representing only the turnover of an alleged accommodation-entry business and consequently limiting the taxable income therefrom to an estimated commission component, notwithstanding the applicability of the statutory provisions governing unexplained income and unexplained credits? C. Whether the ITAT was justified in law in adopting an ad hoc estimation of income at 8% without any supporting evidentiary basis, comparable instances or material on record and thereby deleting substantive additions made on the basis of seized incriminating evidence?

The Tribunal has upheld the findings of the Assessing Officer and the CIT(A) that the additions relating to unexplained cash payments, unexplained cash receipts, unsecured loans and commission were based upon corresponding electronic data found and seized during the search conducted under Section 132, and that the assessee had failed to furnish any satisfactory explanation or material rebutting the same. After holding that the cash receipts and cash payments are unexplaied the Tribunal could not, without any basis, adopt an ad-hoc estimation of income. The Tribunal's

Accordingly, the questions of law raised by the Revenue are answered in affirmative and the Appeal is allowed to the extent that paragraphs No.12 & 13 of the impugned Order are set aside. Pending applications, if any, also stand disposed of.

It is made clear that the Appeals filed by the Assessee will be heard separately and in case those Appeals are also allowed, then the impugned Order shall be remanded back to the ITAT in its entirety. However, in case the said Appeals are dismissed then the computation shall be made by the concerned authorities in accordance with law.