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Facts
The assessee filed appeals against additions for unexplained cash loans (Section 69), notional interest (Section 56), and unexplained jewellery (Section 69A) across assessment years 2012-13 to 2018-19. These additions were made following a search operation, primarily based on incriminating material found at third-party premises, not the assessee's own.
Held
The Tribunal allowed all appeals, deleting the additions. It held that additions for unabated assessment years (2012-13 to 2016-17) could not be sustained without incriminating material found in the assessee's premises, citing PCIT vs Abhisar Buildwell Pvt Ltd. For abated years (2017-18 and 2018-19), the additions lacked factual basis and corroborative evidence, and the addition for unexplained jewellery was deleted as the assessee provided satisfactory explanations within permissible limits.
Key Issues
1. Whether additions can be made in search assessments (Section 153A) without incriminating material found at the assessee's premises. 2. The evidentiary value of third-party statements and estimated additions (cash loans, notional interest, unexplained jewellery) without corroboration against the assessee.
Sections Cited
69, 56, 69A, 132, 132(4), 133A, 143(1), 143(2), 143(3), 153A, 153C, 153D, 250
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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
2 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla section 250 of the Income Tax Act, 1961 (in short, ‘the Act’)for A.Y. 2012-13 to 2018-19, date of orders02/01/2015. The impugned orders wereemanated from the orders of the Learned Deputy Commissioner of Income-tax, Central Circle- 4(1), Mumbai (in short, the “Ld. AO”)passed under section 143(3)read with section 153A for A.Ys 2012-13 to 2015-16 & 2017-18 to 2018-19passed on 29/12/2019 and AY 2016-17 order passed on 28/12/2019andfor AY 2018-19order passed U/s 143(3) of the Act.
All the appeals carry common issue and identical facts, therefore, all the appeals were heard together and are disposed of by this common order.
A.Y. 2012-13 is taken as lead case, where the assessee has raised the following grounds of appeal:-
1. The CIT(A) erred in law and on facts in upholding the action of the AO making the addition of Rs 90,00,000/- in the completed assessment, on account of the alleged cash loan advanced by the appellant to Mr. Nilesh Bharani / Evergreen Enterprises as an unexplained investment u/s 69 of the Act where admittedly during the search on the assessee no incriminating material evidence showing the alleged undisclosed income was found and following the judgment dated 24/04/2023 of the Hon'ble Apex Court in PCTT v Abhisar Buildwell Pvt Ltd (2023) 149 taxmann.com 399 (SC), the addition must be deleted.
2. The CIT (A) erred in law and on facts in confirming the estimated addition of Rs 6,82,333/-made u/s 56 of the Act in the completed assessment presuming interest earned on the alleged cash loans given by assessee and assessed as unexplained investments though no incriminating material at all was found during the search in the premises of the assessee. Thus, following the judgment dated 24/04/2023 of the Hon'ble Apex Court in PCIT v Abhisar Buildwell Pvt Ltd (2023) 149 taxmann.com 399 (SC), the addition must be deleted.
3. That assessment order passed by AO u/s 153A dated 29.12.2019 and impugned appellate order confirming the addition made by the AO are bad in law
3 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla in as much as while passing the impugned orders the material relied upon/taken from (considered incriminating material as per para 8.21 page 46 of impugned appellate order) were found from the premises of Mr. Nilesh Bharani/Evergreen Enterprises during search and which could only be assessed by taking recourse to the section 153C of the Act. Thus, the impugned assessment order must be declared as void ab initio by following the judgment of the Hon'ble Apex Court in Vikram Sujitkumar Bhatia (2023) 149 taxmann.com 123 (SC) dated 06/04/2023 and Nilesh Bharani in ITA 612/Mum/2020 dated 28/03/2023 r/w S S Con Build Pvt Ltd 2023-TIOL-65-SC-IT dated 04/05.2023 r/w Kanwar Singh Saini vs Delhi High Court 2012 4 SCC 307
4. The CIT (A) erred in confirming the additions made by AO ignoring the fact that the assessment framed u/s 153A/143(3) of the Act is required to be treated as 'invalid and shall be deemed to have never been issued in absence of any Document Identification Number (DIN) or for lack of computer-generated Document Identification Number (DIN) thereon which was required to be generated and duly quoted in the body of such communication as has been ordered by the CBDT vide Circular No. 19/2019 dated 14/08/2019 and reiterated vide the circular number 27/2019 dated 26/09/2019.
5. That in view of the facts and circumstances of the case and in law, the approval granted u/s 153D of the Act by the addl. CIT CC-4, Mumbai is mechanical, without any application of mind and is not a valid approval. Thus, the impugned assessment is illegal, bad in law and liable to be quashed.
6. That assessment order passed by the AO u/s 153A dated 29.12.2019 and the impugned appellate order are bad in law as the additions have been framed /confirmed by applying the provisions of the section 69 and 56 of the Act without appreciating the facts and exclusively relying upon the statement of Mr. Nilesh Bharani and other persons and personal ledgers (unsubstantiated & uncorroborated) which suffered from following infirmities:
a. that during the cross examination of Mr Nilesh Bharani, the person searched and creator of alleged incriminating material seized categorically denied to have taken any cash loan from appellant and also denied to have paid any interest to the appellant,
4 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla b. Mr. Nilesh Bharani & other persons had also retracted the statements given by them during the search during the investigation proceedings, c. Mr. Nilesh Bharani had filed an affidavit to the extent before the assessing officer denying all the allegations of the revenue and owned up all transactions in personal capacity recording all in genuine compiled contacts and maintained ledgers written by pencil. d. By not granting an inspection of the alleged original material seized from the premises of Evergreen Enterprises/Mr Nilesh Bharani though specifically demanded to ascertain veracity of photocopy of ledger sheet extracts. Thus, violating all the principles of the law and justice, particularly when the appellant specifically denied his liability to income-tax on the amounts added as his undisclosed income for the relevant assessment year. e. In not appreciating several discrepancies pointed out in various statements of Mr. Nilesh Bharani and his associates /employees allegedly recorded in their premises at the time of search which categorically prove that those statements were not voluntarily given by them but forcibly recorded by forcing them to sign on the dotted lines f. Moreover, statement or any material seized during the course of search u/s 132(4) of the Act can only be used against the searched person and not against the assessee without any corroboration.
Therefore, the all additions premised on conjectures and presumptions should be deleted. 7. The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing.”
3. The brief facts of the case are that the assesee, in individual capacity, filed the return of income, declaring total income at Rs.8,08,636/-.The return was processed under section 143(1) of the Act. A search and survey action under section 132 / 133A of the Act was carried on 06/10/2017 in the case of SunshineGroup, M/s Sabari Developers, LLP & M/s Evergreen Enterprises and 5 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla other entities at their office premises and the residences of main partner and their employees. Subsequently, the assessee was also covered under search action on 18/12/2017. Finally, all the cases were centralized. Subsequent to the search, a notice under section 153A has been issued on 03/12/2018 and duly served on the assessee. In response to the notice issued under section 153A, the assessee filed return of income on 29/12/2018 declaring total income at Rs.8,08,640/-. The assessee filed a revised return on 31/12/22018, declaring the same total income. Finally, the notices under section 143(2) and 142(1) issued and the assessment was framed considering the incriminating material under section 153A related to this search and seizure action under section 132 of the Act and conducted in the case of Shri Nilesh Bharani and M/s Evergreen Enterprises. The Ld.AO noted that the assessee is engaged in business of finance and involved in cash lending and borrowing business and income in cash in form of brokerage& interest. Related to the seized documents, the Ld.AO determined the cash loan advanced by the assessee to Mr. Nilesh Bharani and his alleged companies. Finally, the additions were made under section 69 of the Act for alleged cash loan advanced by the assessee,notional interest U/s 56 of the Act in all the alleged years and for AY 2018-19 addition is confirmed U/s 69A related the unexplained investment injewellery, which are described in the following tabulated form:- Assessment Addition u/s 69 for alleged cash Addition u/s 56 for notional interest Year loan advanced in Rs. earned on cash loan advanced in Rs. (Unabated Assessments) 2012-13 90,00,000/- 6,82,333/- 2013-14 2,35,00,000/- 24,99,833/- 2014-15 4,54,00,000/- 83,03,350/-
6 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla 2015-16 2,73,00,000/- 1,32,68,100/- 2016-17 1,88,00,000/- 1,64,52,325/- (Abated Assessments) 2017-18 15,28,50,000/- 3,69,60,515/- 2018-19 0 3,54,73,133/- 10,42,059/- u/s 69A forUnexplained money(Jewellery)
The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld.CIT(A) upheld the impugned assessment order. The aggrieved assessee filed appeal before us.
In argument, the Ld.AR stated that the assessment years 2012-13 to 2016- 17 are unabated assessment years, so the addition without incriminating material is violation of the ruling of the Hon’ble Supreme Court inPCIT vs. Abhisar Buildwell Pvt Ltd (2023) 149 taxmann.com 399 (SC). But related to A.Ys 2017-18 & 2018-19 are abated years, so the addition are mainly on the basis of assumption and presumptions of the Ld.AO. The Ld.AR submitted a paper book, spanning to pages 1 to 385 which is kept in the record. The Ld.AR argued thaton perusal of the impugned assessment order passed on 29/12/2019 u/s 153A of the Act in pursuance to an income tax search conducted on the assessee u/s 132 of the Act on 18/12/2017 (copy of the panchnama attached at APB page no 1-4), it is clear that no incriminating information /material suggesting any undisclosed income of the assessee was found by the revenue therein as no adverse cognizance / addition has been made in respect thereof in the impugned asessment order except a small addition of Rs. 10,42,059/- on account of unexplained excess jewellery seized though within permissible holding limits (per person) prescribed as per CBDT circular 1916 and further duly explained vide letter dated 04.11.2019 & 16.12.2019 submitted during the Assessment
7 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla proceedings for AY 2018-19. Further, the only effective addition made therein is by alleging some undisclosed investment u/s 69 of the Act by the assessee as cash loans given to one Mr. Nilesh Bharani/ Evergreen Enterprises based on the alleged information found during the course of search on Mr. Nilesh Bharani / Evergreen Enterprises on 06/10/2017.The controversy of assessment of undisclosed income u/s 153A of the Act for the alleged undisclosed income detected elsewhere in a search conducted on some other assessee; but to be assessed in the hands of the assessee though, also searched, but unconnected with the other assessee searched has been settled by the Hon'ble Supreme Court in the judgement dated 22/04/2023 inPCIT vs Abhisar Buildwell Pvt Ltd (2023) 149 taxxman.com 399 which clearly stated that in the case of a completed assessment before the date of search, no addition can be made in the hands of an assessee searched where no incriminating information of any escaped income was found in the search on said assessee in his premises. The Ld.AR submitted that here, the income of the assessee till the assessment year 2016-17 had already been assessed u/s 143(1) of the Act before the date of search and were, thus, completed assessments, as mentioned in the respective assessment orders dated 29.12.2019 passed u/s 153A of the Act. Thus, the additions made in the said fiveassessment years(AY 2012-13 to AY 2016-17) must be deleted by following the said dictate of the Hon'ble Apex Court.
Further, the Ld.AR argued that for the AYs 2017-18 and 2018-19 for which the assessments were pending and time to issue a notice u/s 143(2) of the Act was also pending for the A.Y 2017-18 and the return of income for the A.Y 2018- 19 was not due as the date of search was 18/12/2017, it is stated that the 8 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla additions have been made in the AY 2017-18 merely on an estimated basis, based on some unverified material seized in the premises of Mr. Nilesh Bharani and interest thereon, though no such materialat all, otherwise, was found during the search in the premises of the assessee to estimate any such interest income earned.Thus, as per the settled legal proposition, no addition could be made even for an estimated interest unless some evidence showing receipt of any such payment/consideration was found either from the premises of the assessee or from the premises of the person searched. The assessee was searched u/s 132 of the Act on 18/12/2017 and no information at all in any manner for the interest received in cash or otherwise by the assessee, much less, on the alleged cash loans given by the assessee, was found. Afterall, if the assessee was indulged in such undisclosed cash loans transactions and was earning interest thereon then definitely some information in any manner must have to be found from the premises of the assessee to corroborate the allegation of the revenue. The assessee submitted before the Ld. AO vide letter dated 16-12-2019 (copy attached in APB pages 36-46) that no addition in any manner is permitted in his hands merely based on the alleged unverified information detected elsewhere. In fact, pertaining to the same search, while deleting the addition, the same arguments are accepted by Hon'ble ITAT Mumbai in the following cases: a) DCIT vs Shri Bharat Girdharilal Rughani, to 1517/Mum/2023,Date of pronouncement31.10.2023held that in absence of incriminating evidence against assessee, liability of addition cannot be fastened on the basis of statement only without any corroborative evidence.
9 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla b) Parag Motilal Savla vs ITO,ITA No. 4220/Mum/2023date of pronouncement29.04.2024 held that the assessee has given cash loan to Mr. Nilesh Bharani. But nothing was bought in record by the AO to substantiate the allegation. In absence of concrete evidence on record the addition was deleted.
The Ld.AR further argued that during the course of the assessment proceedings before the Ld. AO on demand of the assessee, Mr. Nilesh Bharani was allowed to be cross-examined and wherein he categorically denied having transacted with the assessee in cash either for getting cash loans or for payment of interest thereon. A copy of his statement recorded on 25/11/2019 during the course ofcross examination by/on behalf of the assessee is also attached at APB page nos. 16-17. In fact, even during the course of search, a statement of the assessee was also recorded u/s 132(4) of the Act, on 20.12.2017, copy is annexed at APB page nos. 05-15 where in relation to question nos. 17 to 24 were raised on the basis of the statements of Mr. Nilesh Bharani and his staff recorded in their premises including specific question no. 24 about the alleged cash loan transaction of Mr. Nilesh Bharani with the assessee (which assessee denied at the threshold) but there is no reference to any incriminating information found during the search on the assessee in his premises as per the copies of the attached panchnamas. The Ld.AR further invited our attention to the statement of the assessee recorded on 18/12/2017, during the course of search. The relevant statement of the assessee is extracted as below: -
10 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla “Q.17. Do you know Mr. Nilesh Shamji Bharani. Ans. Yes I Know him.
Q. 18. Do you have any business relation with Mr. Nilesh Bharani.
Ans. Yes I have business relation with Mr. Nilesh Bharani.
Q.19. Have you made any transaction with Mr Nilesh Bharani Ans. I and my family members have given unsecured loan of Approx. 35 Lakhs to his clients through Cheques over a period of time for which I got interest from his clients to whom he has given those cheques.
Q.20. 1 am showing you the statement of Mr Nilesh S Bharani recorded on oath during the search proceeding u/s 132(4) of the Income Tax Act,1961 on 11.10.2017 in the case of M/s Evergreen Enterprises at 12, Sharda Sadan, 7 S.G. Marg, Dadar (E), Mumbai -400014.Please go through the said statement of Mr. Nilesh S Bharani specifically from question no 20 to 33 in which Mr. Nilesh S Bharani has admitted to be involved in the cash lending/borrowing activities Please confirm the same and offer your comments. (The deponent has requested to offer 30 minutes to go through the statement of Mr. Nilesh S Bharani and time of 30 mints has given for the same)
Ans, Sir, I have gone through the statement of Mr. Nilesh Bharani and I am not aware about cash lending and borrowing business. However, I am Broker for arranging Loan in that context I met him many times for business purpose for lending money from my own family by cheque. Q. 21. ……………………… Q.22………………………… Q. 23…………………………….. Q. 24. Have you ever made any transaction with Mr. Nilesh Bharani in cash.
Ans. No Sir, I have never made any transaction with Mr. Nilesh Bharani in cash.”
It is just because no incriminating material at all in support of the alleged cash loan transactions and any interest earned thereon was found during the course of 11 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla search in the premises of the assessee. The assessee relied on the undernoted authorities in support of the contention that no addition could be made in respect of the pending assessments on date of search in absence of any incriminating information / material found in the search: 1. PCIT vs Abhisar Buildwell (P.) Ltd (2023) 149 taxmann.com 399 (SC) ii. PCIT vs Jay Ace Technologies Ltd. (2023) 154 taxmann.com 45 (SC)where no incriminating material had been found during search and brought on record by Assessing Officer and investor companies had ample funds to make investment in share capital of assessee, addition made under section 68 on account of share application money was to be deleted
The Ld.AR otherwise submitted that if the revenue really wanted to assess the alleged amounts (cash loan given) as undisclosed income of the assessee detected based on the alleged incriminating information/material found during the course of search in the premises of Nilesh Bharani / Evergreen Enterprises but not in the premises of the assessee, then the only permitted course available with the revenue was by taking recourse to the machinery provisions of the section 153C r.w.s 153A and not 153A of the Act. The Ld. AR respectfully relied on the order of the Hon’ble High Court of Karnataka in PCIT vs VSL Mining Company Pvt Ltd [2024] 167 taxmann.com 373and relevant observation of the Hon’ble Court is reproduced as below:- “15. In view of the settled position of law as noticed above, once material pursuant to a search is relied upon, the AO is required to follow the procedure as contemplated under Section 153A,
12 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla 153B and 153C of the IT Act and it is impermissible for the AO to continue the regular assessment.”
The above judgments support the contention of the assesseethat even otherwise cognizance of any amount considered as undisclosed income in a search in the hand of assessee in pursuance to the search warrant on Mr. Nilesh Bharani/Evergreen Enterprises could only be considered u/s 153C of the Act. It is also important to appreciate that in Abhisar Buildwell (supra) the Hon'ble Supreme Court has not overruled the mandatory non-obstante provisions u/s 153C of the Act after an income tax search where the revenue failed to find anything incriminating even in respect of the pending assessment because as per the law, the said special machinery provision u/s 153C of the Act.
It is pertinent to mention that the lenders & borrowers identified by the revenue from the search on Mr. Nilesh Bharani/Evergreen Enterprises and who were subjected to additions in their respective reassessment proceedings for concealment of income/other violations, which additions have not been found correct at different forum of appeals before the CIT(A)&ITAT and arbitrary additions have been deleted. The Coordinate bench of ITAT Mumbai in the following cases, has ruled in favour of appellants finding non-clinching/concrete evidence for alleged cash transactions (borrowing): Premji Bhurelal Gala vs NFAC - (2024) 162 taxmann.com 570(Mumbai-Trib.) DCIT vs Vipul Dilipbhai Shah in of pronouncement 7.06.2022 10. In argument, the Ld.AR argued that the coordinate bench while considering the issue of addition made on similar issue found during search of Mr. Nilesh
13 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla Bharani / Evergreen Enterprisesis adjudicated in case of Rajeshkumar Rameshchandra Shah vs. DCIT in to 5573/M/2024, date of pronouncement 31/01/2025, the co-ordinate bench of ITAT, Mumbai Bench “D” has held as below: - “12. As could be seen from the above extract, in the cross examination taken on oath, on a specific question asked by the assessee, Shri Nilesh Shamji Bharani denied of having entered into any cash loan transaction with the assessee. Thus, the facts on record reveal that except the so called incriminating material seized from the premises of Shri Nilesh Shamji Bharani and some statements recorded u/s. 132(4) of the Act from individuals related to M/s. Evergreen Enterprises, the A.O. had no other corroborative evidence available with him to establish that the assessee had actually advanced any cash loan to Shri Nilesh Shamji Bharani. Moreover, the assessee from the very beginning had emphatically denied of having any cash loan transaction with Shri Nilesh Shamji Bharani. Even, a couple of days after recording of statements u/s. 132(4) of the Act, the concerned persons including Shri Nilesh Shamji Bharani had retracted their statements. In fact, Shri Nilesh Shamji Bharani had filed an Affidavit before the A.O in course of assessment proceedings completely denying the fact of cash loan transaction and had explained that the entries appearing in the seized document, in reality, represents the cash given to him by his father.
13. When the assessee as well as Shri Nilesh Shamji Bharani and other individuals have denied of alleged cash transaction in subsequent events, the duty of the A.O. was to gather more corroborative evidence to establish on record that the entries appearing in the seized material actually represent cash loan transaction of the assessee. However, except the seized material and the statements recorded u/s. 132(4) of the Act from some third-party individuals, the A.O. has absolutely no other evidence on record to corroborate the alleged cash loan transaction of the assessee. Pertinently, though, during the time search and seizure operation was carried out in case of M/s. Evergreen Enterprises and Shri Nilesh Shamji Bharani, a search and seizure operation was also carried out in case of the assessee, however, not a single piece of 14 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla incriminating material was recovered from the assessee indicating involvement of assessee in the alleged cash loan transaction or any other illegal activity. In fact, it is relevant to observe, in the statement recorded u/s. 132(4) of the Act, Shri Jagdish T Ramani, who allegedly was assisting Shri Nilesh Shamji Bharani in his work, had stated that Shri Nilesh Shamji Bharani had instructed him to follow up with the lender, i.e., the assessee, to determine the modality of payment. He had stated that he instructed one of the office boys to collect money from the lender and after the money is collected, it is given to the borrower on execution of a promissory note. He had further stated that after the money is delivered to the borrower and promissory note is obtained, he had instructed the office boy to deliver the promissory note to the lender. It is quite surprising that considering the magnitude of the alleged cash loan transaction appearing in the seized document, not a single piece of incriminating material relating a cash loan transaction was recovered from the assessee during the search and seizure operation conducted on assessee. If the version of Mr. Jagdish T Ramani that the promissory note given by the borrower is delivered to the lender is to be taken on face value, then at least if not all few such promissory notes would have been recovered in course of search and seizure operation carried out in case of the assessee. It is quite improbable that such huge amount of cash loan transaction would not leave any trace of incriminating material /evidence with the assessee. Thus, on cumulative analysis of facts and materials available on record, we are of the opinion that is no conclusive evidence was available with the A.O. to establish on record that the entries appearing in the seized material actually represent cash loan transaction of the assessee.”
The same observations were takenby the ITAT Mumbaiin the same search case in case of M/s Rupal Kashyap Mehta vs DCIT in to 6196/Mum/2024, date of order 27/02/2025 where the Bench followed the same observations taken in case of Rajeshkumar Rameshchandra Shah vs. DCIT (supra).
The Ld.DR argued and relied on the orders of the revenue authorities. The observations of the Ld.CIT(A) are reproduced as follow: -
15 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla “8. Ground No. 2 & 3 relate to the addition of Rs. 90,00,000/- made u/s 69 on account cash loan given and addition of Rs. 6,82,333/- made u/s 56 on account of interest earned on cash loan given. Ground No. 1, 4, 5, 6, 7 & 8 are interlinked to the very same issue in Ground No. 2 & 3 and are taken up together for adjudication.
8.1. During the Search & Seizure action u/s 132 of the IT Act, 1961, conducted in the case of Mr. Nilesh Bharani and M/s. Evergreen Enterprises, at 5, Sharda Sadan, 7 S.G. Marg, Dadar (East), Mumbai-400014, on 06.10.2017, incriminating evidences related to undisclosed money lending activity carried out by Mr. Nilesh Shamji Bharani were found and seized vide Annexure A-1 to A-117. Shri. Nilesh Bharani deposed that he is engaged in the business of finance and involved in cash lending. borrowing business and cash income. He also stated that he used the employees of firm M/s. Evergreen Enterprises for this purpose although the firm had no link to money lending activity carried out by him.
8.2. The books of account related to undisclosed money lending activity /businesswhich were found and seized at the above-mentioned premises are as follows:- i. Ledgers of lenders ii. Ledgers of borrowers iii. Interest calculation pads iv. Promissory Notes v. Telephone diary vi. Confirmation note/s from the borrower vii. Undated cheques bearing amount and sign of the borrower as security.
8.3. The AO has elaborately described the content of each of the above item. According to the AO, the codes to the lenders are assigned on the basis of a telephone diary which has names and various numbers serial wise. The codes of these lenders are assigned using the initial alphabet of the surname / company name / firm name, the serial number in the telephone diary and the initial alphabet of the name of proprietor / director/partner or name of the lender. For instance, in the code name of the lender, "S/41/S", the first character, "S" stands for Savla, the surname of lender, the second character, "41" refer to 16 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla the Sr. No. in the diary at which the contact details of the lender are recorded (reproduced in the assessment order) and the last field, "S" refers to the first alphabet of the name of the lender, Shantilal. The amounts in the lender ledger are entered by using a scale by which three zeros (000) are removed, i.e., Rs.1000 was entered as Rs.
For example, an entry 2500 in the lender ledger represents an actual transaction of Rs.25,00,000/- 8.4. The AO noted that Shri Nilesh Bharani had admitted to have undertaken the business of cash loan lending / borrowing in his individual capacity and that the books of accounts were kept at third floor of the same building. He had explained the lender and borrower ledgers and the details contained in them. He further mentioned that Mr. Ashwin Amrit Lal Rathod and Mrs. Vibha Rawte had managed the accounts of his business and other employees handled in cash on his directions. In reply to question number 30, Shri Nilesh Bharani has admitted that "three zeros" are missing in the figures mentioned in the books.”
We have heard the rival submissions and perused the material available on record. The issue pertaining to the existence of incriminating material for theassumption of jurisdiction by the Ld. AO under section 153A of the Act has been duly challenged by the assessee before the Ld. CIT(A) and the Hon’ble ITAT. The incriminating material relied upon by the revenue was found at the premises of Mr. Nilesh Bharani and M/s Evergreen Enterprises, and the statements of the partners therein were recorded as evidence of undisclosed income.It is an undisputed fact that Mr. Nilesh Bharani is engaged in the business of finance, particularly in cash lending and borrowing, and has earned income in cash. However, based on the statement of the assessee, it is evident that the assessee merely advanced a loan of Rs. 35 lakhs to Mr. Nilesh Bharani through banking channels. The assessee was also subjected to a search under section 132 of the Act on 18/12/2017, but no incriminating documents or material were found at the premises of the assessee.The entire addition in the present case is based solely on presumptions and pertains to third parties involved in the same search
17 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla proceedings. Factually, the same issue has already been adjudicated in favour of the assessee. We respectfully rely on the decisions of the Coordinate Bench of the ITAT-Mumbai in the cases of Rajeshkumar Rameshchandra Shah vs. DCIT(supra) and Rupal Kashyap Mehta (supra), and observe that the Hon’ble Supreme Court's ruling in Abhisar Buildwell (P.) Ltd. is squarely applicable to the facts of the present case. Accordingly, as there is no incriminating material found in the possession of the assessee during the search, the additions made for AYs. 2012–13 to 2016–17 are beyond the jurisdiction of the Ld. AO under section 153A of the Act. Consequently, Ground Nos. 1 to 3 raised by the assessee are allowed. Since the legal grounds raised by the assessee have been allowed, the remaining grounds are left open and require no adjudication.
In view of our decision in which has been decided in favour of the assessee, the appeals in to 361/Mum/2025 are mutatis mutandis covered by the same reasoning and are accordingly allowed. appeal pertains to an abated assessment year. The additions made include an amount under section 69 for alleged cash loan advanced and a notional interest under section 56 of the Act on such loan. However, the entire addition is without any factual basis. Following the precedent set by the coordinate bench of ITAT-Mumbai in Rajeshkumar Rameshchandra Shah vs. DCIT (supra), we allow this appeal and delete the additions in full.
18 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla In the impugned assessment order, additions have been made in respect of notional interest of Rs. 3,54,73,133/- on alleged loan advanced and an addition of Rs. 10,42,509/- towards unexplained jewellery aggregating to 136.88 grams under section 69A of the Act. The Ld. AR submitted that the assessee had duly explained the source and ownership of the jewellery during the assessment proceedings through written submissions dated 04.11.2019 and 16.12.2019 pertaining to AY 2018–19. It was emphasized that the assessee's family comprises seven members—three male and four female members—and as per CBDT circular 1916dated 11/05/1994, female members are entitled to 500 grams of jewellery each as "Stridhan," and male members to 100 grams each. Additionally, certain jewellery belonging to the assessee’s aunt was explained vide letter dated 16.12.2019 (refer APB, Pages 36 to 80). Hence, it was prayed that the addition of Rs. 10,42,509/- be deleted.
In our considered view, the Ld. AO has failed to substantiate the existence of any cash loan advanced by the assessee to Shri Nilesh Bharani or M/s Evergreen Enterprises. The existence of such a loan is not supported by any credible evidence. Accordingly, the notional interest of Rs. 3,54,73,133/- is hypothetical and the calculation thereof is arbitrary. Further, the addition of Rs. 10,42,059/- towards unexplained jewellery has been satisfactorily explained in the assessment and appellate proceedings. Considering the family size of seven members, the quantity of jewellery found is within permissible limits. Therefore, the observation of the Ld. CIT(A) is devoid of merit. Accordingly, the additions of Rs. 3,54,73,133/- under section 56 and Rs.10,42,059/- under section 69A of the Act are hereby deleted.
19 ITAs 357 to 363/Mum/2025 Shantilal Hirji Savla The assessee’s appeal bearing is allowed.