DEPUTY COMMISSIONER OF INCOME TAX, CHENNAI vs. SHRI ARUN KUMAR JAIN, CHENNAI

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ITA 1828/CHNY/2026Status: DisposedITAT Chennai28 October 2026AY 2021-228 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO himself agreed that the assessee was involved in the money lending business, a fact also confirmed by the assessee in his statement under Section 131. The seized red notebooks contained details of money lending business transactions. The assessee admitted advancing cash loans to Shri Amit Kothari for the money lending business and voluntarily disclosed a sum of Rs. 5,50,00,000/- as undisclosed income. The AO prepared a table showing interest received by the assessee from FY 2018-19 to FY 2021-22 amounting to Rs. 1,92,70,203/-. The Tribunal noted that the assessee declared income under the head 'business' and the AO did not bring any new material to justify treating it as unexplained investment. Relying on the decision in O. Rm. Sp. Sv. Firm v. CIT, the Tribunal held that income falling under a specific head cannot be taxed under another head. The CIT(A) was justified in accepting the assessee's claim as the AO relied on materials except the assessee's claim about the head of income. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the grounds raised by the Revenue.

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for AY 2021-22. A search was conducted on Shri Amit Kothari on 23.09.2021, which also covered the assessee's business premises. Notebooks seized during the search contained receipts and payments related to the money lending business. The assessee's return was selected for scrutiny. The Assessing Officer (AO) treated an amount of Rs. 1,70,62,500/- as unexplained investment under Section 69 of the Income Tax Act, 1961, instead of business income as declared by the assessee. This led to an additional tax liability under Section 69 read with Section 115BBE. The CIT(A) deleted this addition, leading to the present appeal by the Revenue.

What were the issues?

1. Whether the CIT(A) erred in deleting the addition of Rs. 1,70,62,500/- made by the AO under Section 69, when the addition was based on incriminating material seized during search proceedings indicating unexplained investments not recorded in books of account (Section 69, Section 131, Section 115BBE)? - Revenue's contention: The addition was based on incriminating material and the assessee's own admission of cash transactions outside books. The CIT(A) wrongly accepted the income as business income without proper substantiation and erred in treating the amount as unexplained investment, leading to double taxation. - Assessee's contention: Not recorded in the judgment. 2. Whether the CIT(A) erred in relying on judicial precedents when the facts of the present case were distinguishable due to seized documents and statements recorded under Section 131 (Section 69, Section 131)? - Revenue's contention: The CIT(A) relied on precedents without appreciating that the facts were distinguishable, particularly in view of seized documents and statements. - Assessee's contention: Not recorded in the judgment. 3. Whether the CIT(A) erred in holding that treating the amount as unexplained investment would result in double taxation, without appreciating that the nature and source of income remained unexplained (Section 69, Section 115BBE)? - Revenue's contention: The CIT(A) wrongly held that treating the amount as unexplained investment would result in double taxation, ignoring that the nature and source remained unexplained. - Assessee's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 69,Section 131,Section 115BBE,Section 132,Section 143(2),Section 292C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: HONOURABLE SHRI S.S. VISWANETHRA RAVI & SHRI GAGAN GOYAL

Hearing: 29.09.2026Pronounced: 28.10.2026

आयकर अपीलीय अधिकरण, ‘बी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI माननीय श्री यस. यस. विश्वनेत्र रवि, न्याययक सदस्य एवं श्री गगन गोयल लेखा सदस्य के समक्ष BEFORE HONOURABLE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 1828/Chny/2026 यनिाारण वर्ा /Assessment Years: 2021-22 Deputy Commissioner of Income Tax, v. Shri Arun Kumar Jain, Central Circle-2(1), No.38, Rattan Bazaar, Parktown, Chennai. Chennai-600 003. [PAN: ACWPJ8112C] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr. R. Venkata Raman, C.A. Ld. AR प्रत्यर्थी की ओर से /Revenue by : Mr. Dr. Mohan Reddy.R, CIT, Ld. DR सुनवाईकीतारीख/Date of Hearing : 29.09.2026 घोषणाकीतारीख /Date of Pronouncement : 28.10.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This is an appeal preferred by the Revenue against the order of Ld. Commissioner of Income Tax (A), (hereinafter referred to as the ‘Ld. CIT(A)’), Chennai-19 dated 28.01.2026, for the Assessment Year (hereinafter referred to as the ‘AY’) 2021-22.

GROUDS OF APPEAL 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,70,62,500/- made by the Assessing Officer u/s 69 of the Income Tax Act, 1961. 3. The learned CIT(A) failed to appreciate that the addition was based on incriminating material seized during search proceedings, clearly indicating unexplained investments not recorded in the books of account.

ITA No.1828/Chny/2026 Shri Arun Kumar Jain 4. The learned CIT(A) erred in accepting the assessee's contention that the impugned amount constituted business income, ignoring the fact that the same was not substantiated with proper books or documentary evidence at the time of assessment. 5. The learned CIT(A) wrongly held that treating the amount as unexplained investment would result in double taxation, without appreciating that the nature and source of income remained unexplained 6. The learned CIT(A) erred in relying on judicial precedents without appreciating that the facts of the present case are distinguishable, particularly in view of the seized documents and statement recorded under section 131. 7. The learned CIT(A) failed to consider that the assessee had admitted cash transactions outside the books, thereby justifying invocation of section 69 and taxation under section 115BBE. 8. The order of the learned CIT(A) is erroneous and contrary to the facts and provisions of law. and therefore, the order of the Assessing Officer deserves to be restored. 9. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.

2.

The brief facts of the case are that the assessee filed his return of income on 27.03.2022 declaring a total income of Rs. 2, 50, 45, 451/-. A search action u/s. 132 of the Act was conducted in the case of Shri Amit Kothari on 23.09.2021. The business premises of the assessee were also covered during the search. During, the course of search proceeding at the office premises of Shri Amit Kothari, some notebooks were found and seized vide annexure ANN/KRN/AKK/B&D/S-1-3 dated 25.09.2021. The return of the assessee was selected for compulsory scrutiny and a notice u/s. 143(2) of the Act was issued and ultimately the case of the assessee was assessed at returned income of Rs. 2, 50, 45, 451/-, but out of this figure, a figure of Rs. 1, 70, 62, 500/- was treated u/s. 69 of the Act instead of treating the same as business income (as declared by the assessee). This resulted in additional liability of tax by virtue of section 69 r.w.s. 115BBE of the Act. The assessee being aggrieved preferred an appeal before the Ld. CIT(A), who in turn allowed the appeal of the assessee. Now, the Revenue is being aggrieved preferred the present appeal before us.

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ITA No.1828/Chny/2026 Shri Arun Kumar Jain 3. We have gone through the order of the AO, the order of the Ld. CIT(A) and the grounds taken by the Revenue along with arguments of the both the sides. It is observed that the assessee is an active partner in M/s. Deekay Electricals. In addition to this, vide assessment order itself the AO agreed that the assessee is into the business of money lending. As per the notebook found at the premises of Shri Amit Kothari, it was found that the red coloured notebooks contained receipts and payments relating to money lending business and other related activities. The same was confronted from Shri Amit Kumar Kothari in his sworn statement dated 25.09.2021 wherein he deposed that the red coloured notebooks seized during search were maintained by him and contained the details of unaccounted receipts and payments undertaken in the money lending business. The seized material contains the details of the loans advanced by the assessee through syndicate.

4.

During post-search investigation, a statement of Shri Amit Kothari was recorded u/s. 131 of the Income Tax Act, 1961 on 27.12.2021 in which Shri Amit Kothari was asked to explain the unaccounted receipts and payments recorded in the red coloured notebooks seized vide annexure ANN/KRK/AKK/B&D/S-1-3 dated 25.09.2021. It was found that the assessee has advanced loans to the tune of Rs. 5.06 Cr. during the F.Y. 2019-20 to F.Y. 2021-22 out which Rs. 2.25 Cr. was advanced during the F.Y. 2020-21 (i.e. A.Y. 2021-22). The same issue was confronted before the assessee as question number 12 while recording the statement u/s. 131 of the Act on 10.01.2022. In response, the assessee has admitted that he had advanced cash loans to Shri Amit Kothari for money lending business.

5.

The relevant extract of the statement given by the assessee is being reproduced as under along with the extract of red notebooks vide annexure ANN/KRK/AKK/B&D/S-1-3 dated 25.09.2021 mentioned (Supra):

Sir, I confirm that the sworn statement recorded from Shri Amit Kothari dt. 25.09.2021 and dt. 27.12.2021 has been shown to me. Being a syndicate member, I admit that I have had advanced cash to Shri Amit Kothari for money lending business. However, my transactions with Shri Amit Kothari are continuous in nature. I need to check my books of accounts as the money that was repaid to me was further re-invested in the finance business. Please give me 10 days’ time to Page 3 of 8

ITA No.1828/Chny/2026 Shri Arun Kumar Jain reconcile my books of accounts to enable me to furnish the details called for. I am voluntarily disclosing a sum of Rs. 5,50,00,000/- as my undisclosed income. Any issue arising out of the above may be considered in my disclosure. 18-Mar-19 Arun ostwal Rs. 5,00,000/- 13-Sep-19 Arun ostwal (HL Account) Rs.50,00,000/- 25-oct-19 Arun Ostwal (HL Account) Rs.15,00,000/- 29.10.2019 Arunkumar (cheque) Rs.1,00,000/- 07-Jan-20 Arun Ji Hand Loan paid on 09.01.20 Rs.10,00,000/- Arun (H/L) (Chart prepared) (Ree 01.01.21 paid 50) 09-Dec-20 Rs.75,00,000/- (04.01.21 paid 25) 13-Jan-21 Arun Ostwal (Goutham Norwood (Kunkan cable) Rs.1,00,00,000/- 01-Apr-21 Arun (Bal 11) Rs. 9,00,000/- 03-Apr-21 Arun Rs.11,00,000/- 26-Aug-21 Arun (H/L) Rs.5,00,000/- 09-Sep-19 Cola tomer (Arun Ostwal) Rs.15,00,000/- 11-Dec-19 Suspense a/c (Arun) (20.12.2019) (40+20) (60-45) = Bal 15 Rs.60,00,000/- 19-Jan-21 N. C. Jain (Delhi Arun a/c.) Rs.25,00,000/- 25-Jan-21 N. C. Jain (total 50 paid to) Rs.25,00,000/- Total Rs.5,06,00,000/-

6.

As discussed, (supra) vide para 3, the AO himself agreed that the assessee under consideration was regularly involved in money lending business and the same is being confirmed by the assessee himself in his statement u/s. 131 of the Act as reproduced (supra) vide para 4 & 5. In addition to the above, we are reproducing a table prepared by the AO out of seized material as under: -

S. No. F.Y. Interest received (in Rs.) 1. 2018-19 3,50,000/- 2. 2019-20 34,80,003/- 3. 2020-21 54,37,500/- 4. 2021-22 1,00,02,700/- Total 1,92,70,203/- The table above is not under challenge by the assessee and Revenue. As the total income earned by the assessee in four years i.e. from F.Y. 2018-19 to F.Y. 2021-22 is Rs. 1,92,70,203/- and as the assessee himself stated that money was being invested in the money lending business in response to the answer against question no.12 of the statement taken u/s. 131 of the Act (reproduced supra) vide para 5. In view of all the facts discussed in addition to an honest declaration of income in the ITR filed and no specific evidence adduced by the Revenue, in all fairness of the

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ITA No.1828/Chny/2026 Shri Arun Kumar Jain matter and on specific set of facts even applying the principle of benefit of doubt, the action of the AO cannot be sustained.

7.

Moreover, we have considered the provisions of section 292C of the Act, relevant portion is reproduced below: -

Presumption as to assets, books of account, etc. 292C. (1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed - (i) that such books of account, other documents, money, bullion, jewellery or other valuable articles or thing belongs or belongs to such person;

(ii) that the contents of such books of account and other documents are true; and

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of section 132A, then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of section 132A, had been found in the possession or control of that person in the course of a search under section 132. In view of the above provisions of section 292C of the Act, it can be reasonably said that the presumption of section 292C of the Act has two essential elements, i.e. there must be a search or survey at the premises of the assessee u/s. 132 or 133A of the Act respectively and the books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of person in the course of a search under section 132 or survey under section 133A of the Act. As in this case seized material was found at the premises of Shri Amit Kumar Kothari and not at the premises of the assessee, although search was there on the premises of the assessee also.

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ITA No.1828/Chny/2026 Shri Arun Kumar Jain 8. Presumption in favour of the revenue u/s. 292C of the Act can be exercised by the revenue only against the party from whose premises documents were seized and can’t be applied on other parties may be searched even, u/s. 132(4) of the Act, an authorized officer during search can examine on oath any person who is found to be in possession of any books of account, documents, money, bullion, jewellery, etc. Statement made by such person during such examination may thereafter be used in evidence in any proceedings against him only. Still, the assessee under consideration without any objection, in his statement u/s. 131 of the Act accepted the contents of the red notebook and statement of Shri Amit Kumar Kothari. But here arises an important question, whether the statement of the assessee can be accepted in piece-meal, i.e. accepting the amounts involved but not accepting the other version of the statement of the assessee, i.e. about nature of income declared by the assessee and accepted by the AO himself.

9.

The amount surrendered by the assessee is declared in the year under consideration and succeeding year also under the head business. The assessee has surrendered Rs. 5,50,00,000/- as an additional income, he has offered Rs. 2,25,00,000/- in the return of income filed for A.Y. 2021-22 and remaining amount of Rs. 3,25,00,000/- in the return of income filed for A.Y.2022-23. Chapter IV of the Act defined the various heads of income, has it own logic and jurisprudence behind it, neither the AO nor the assessee has authority to change the head of income without support of law and logics. In O. Rm. Sp. Sv. Firm v. CIT [1960] 39 ITR 327 (Madras) the Madras High Court held that:

"Under the Indian Income-tax Act, 1922, the income of an assessee is one, and section 7 to 12 of the Act direct the modes in which the income-tax is to be levied. No one of those sections can be treated to be general or specific for the purpose of any particular source of income. They are all specific and deal with the various heads in which an item of income, profits and gains of an assessee fall. These sections are mutually exclusive and where an item of income falls specifically under one head it has to be charged under that head and no other." No doubt in that case the learned judges had to decide whether the interest on securities, which fell under section 8 of the Income-tax Act, also came within the scope of section 10 of that Act. But what applies to section 8 obviously also applies to section 9 in relation to section 10. What has to be computed for purposes of assessment under section 9 cannot be brought within the scope of section 10 of the Income-tax Act. With reference to the interest on securities what the Supreme Court laid down was:

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ITA No.1828/Chny/2026 Shri Arun Kumar Jain "Income from interest on securities falls under section 8 of the Act and not under section 10; it cannot be brought under a different head of income, viz., profit and gains of business under section 10, even though the securities are held by a banker as part of his trading assets in the course of his business." 10. In the instant case, the Assessing Officer did not bring any new material on record to show as to why he had taken a different view as against the stand taken by the assessee in the year under consideration and, therefore, the Ld. CIT (A) was justified in accepting the claim of the assessee, as the AO is placing reliance on all the materials except the claim of the assessee about the head for taxation. If an income falls under more than one head, the assessee has the option of choosing for the purpose of income-tax such head and if there is no doubt as regards the head under which a given income becomes chargeable to tax, it is not open either to the assessee or to the department to ignore that head and deal with the income for the purpose of the tax under a different head. In other words, it is imperative on the part of the department to charge the income under the specific head, under which it falls since the law leaves no option in the matter.

11.

The assessee is in the business of money lending, and this fact is not under challenge. There was no change in the activities of the assessee during the year under consideration, previous years and succeeding years also. Once all these facts are taken into consideration in totality and they are being undisputed, one does not see how the Ld. CIT(A) can be faulted. The Ld. CIT(A) has performed its duty as a First appellate authority only. The Ld. CIT(A) being empowered by law to undertake the exercise and has performed its duty. One does not see how in such background can the Ld. CIT(A)’s view be termed as perverse or its order termed as vitiated by an error of law apparent on the face of record. The reasons assigned from the impugned order are based on the materials produced before the Ld. CIT(A) and forming part of the record. The Ld. CIT(A) has not gone beyond the same.

12.

If this action of AO is allowed to be done, it will misguide the whole scheme of search assessments. Where either disclosure by the assessee or additions by the AO is to be done based on seized materials and statements of people concerned. These materials and statements can’t be relied upon in piecemeal and rather must be read and relied upon in totality. In view of the discussion and respectfully

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ITA No.1828/Chny/2026 Shri Arun Kumar Jain following the decision of the Hon’ble Jurisdictional High Court as mentioned (supra) in the case of O. Rm. Sp. Sv. Firm v. CIT, we do not find any infirmity in the order of the Ld. CIT(A), hence the same is sustained and grounds raised by the Revenue are dismissed. 13. In the result, the appeal of the Revenue is dismissed in above terms. Order pronounced on the 28th day of October 2026, in Chennai.

Sd/- Sd/- (यस. यस. विश्वनेत्र रवि) (गगन गोयल) (S.S. VISWANETHRA RAVI) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनाांक/Dated: 28th October 2026. KB आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रयतयनधि/DR 5. गार्ड फाईल/GF Digitally signed K BABU by K BABU Date: 2026.10.29 10:16:44 +05'30'

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