INCOME TAX OFFICER , MUMBAI vs. BHAGWANDAS BHERUMAL ADANI, MUMBAI

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ITA 5026/MUM/2024Status: DisposedITAT Mumbai13 May 2025AY 2016-177 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 there was no evidence whatsoever to establish that any amount of cash loan was given by the assessee to the Ahuja Group during the Assessment Year 2016-17. The Tribunal noted that the only seized documents relating to cash loans pertained to Financial Year 2012-13 and earlier. Therefore, the Tribunal found that the CIT(A) was correct in directing the AO to examine the financial years in which the loan was given by the assessee to the Ahuja Group and take action, if necessary, in the relevant year. The Tribunal concluded that there was no justification for making the addition of Rs. 5,32,83,600 under Section 69 of the Act in the current year and saw no reason to interfere with the order of the CIT(A). The ratio decidendi is that an addition under Section 69 for unexplained investment cannot be made in an assessment year if the evidence does not establish that the investment or transaction occurred in that specific year, and the AO should investigate the correct financial year for such transactions.

What were the facts?

The Revenue (ITO) filed an appeal against the order of the CIT(A) dated 30.07.2024, which had deleted an addition of Rs. 5,32,83,600 made by the Assessing Officer (AO) under Section 69 of the Income-tax Act, 1961, for Assessment Year 2016-17. The assessee, Bhagwandas Bherumal Adani, had filed a return declaring an income of Rs. 11,10,160. The AO reopened the case based on information from a search in the Ahuja Group, which indicated the assessee had given an unaccounted cash loan of Rs. 5,32,83,600 to the Ahuja Group. This amount was reflected in seized documents. The AO treated this as undisclosed income and made the addition. The assessee's objections before the CIT(A) were that no concrete evidence of investment in any asset by the assessee existed, and the seized evidence from the third-party Ahuja Group was not pertaining to AY 2016-17. The CIT(A) deleted the addition, noting that seized documents only showed repayments of Rs. 35 lakh and no other cash transactions, and the year of receipt of the loan was not mentioned. The AO was directed to examine the financial year in which the loan was given.

What were the issues?

1. Whether, on the facts and in law, the CIT(A) was correct in deleting the addition of Rs. 5,32,83,600 made by the AO under Section 69 of the Income-tax Act, 1961, for AY 2016-17 on account of a loan balance treated as unexplained investment. Assessee's arguments: The assessee contended that there was no concrete, corroborated evidence for investment in any identified asset by the assessee, and therefore, the CIT(A) was correct in deleting the addition. The assessee also argued that the evidence seized during the search of the third-party 'Ahuja Group' did not pertain to AY 2016-17, making the addition beyond the scope of the Act. Furthermore, the assessee stated that as there was no such transaction, the question of further explanation by the assessee did not arise, especially in light of an affidavit filed by the legal heir. The assessee relied on the affidavit dated 28.02.2023 filed before the CIT(A). Revenue's arguments: The Revenue argued that the CIT(A) failed to appreciate that the onus was on the assessee to explain and substantiate the transaction of outstanding cash loan balance during the relevant financial year, which the assessee failed to do with documentary evidence. The Revenue also highlighted that the Ahuja Group, in its application before the Settlement Commission, included the amount of Rs. 5,32,83,600 as an outstanding loan in the name of Shri Bhagwandas Adani, making it clear that the amount was outstanding as of the search date (26.06.2015). The Revenue relied on the assessment order and documentary evidence seized, as well as statements recorded during the search.

Which sections of the Income-tax Act were involved?

Section 69,Section 147,Section 148,Section 144C(1),Section 144C(3),Section 250

AI-generated summary — verify with the full judgment below

Before: SHRI SANDEEP GOSAIN & SMT. RENU JAUHRI

For Appellant: Shri Subhash Bains, Shri Leyaqat Ali Aafaqui
For Respondent: Shri Leyaqat Ali Aafaqui
Hearing: 18.03.2025Pronounced: 13.05.2025

Heard together (2 matters)

ITA No. 5026/MUM/2024
CO No. 273/MUM/2024

Read from the judgment's own cause title. This page is filed under one of them.

CO No. 273/Mum/2024 A.Y. 2016-17 Bhagwandas Bherumal Adani आदेश / O R D E R PER RENU JAUHRI [A.M.] :- The above appeal is filed by the revenue, on which cross objections is filed by the assessee, against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai-55 [hereinafter referred to as “CIT(A)”] dated 30.07.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2016-17.

2.

The revenue has raised the following grounds of appeal: 1. "Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) is correct in deleting addition u/s 69 of the IT Act of Rs. Rs.5,32,83,600/-made by the A.O. for AY 2016-17 on account of loan balance treated as unexplained investment u/s 69 the IT Act.

2. "Whether on the facts and circumstances of the case and in law the Ld. CIT(A) is correct in not appreciating the fact that Ahuja group, in application made before the Settlement Commission, included the amount of Rs.5,32,83,600/- as outstanding loan in the name of Shri Bhagwandas Adani. Thus, the evidences seized during the search in the case of Ahuja group and admission of Ahuja group before the Settlement Commission make it clear that the amount of Rs. 5,32,83,600/- was outstanding in the name of late Shri Bhagwandas Adani as on the date of search, i.e., 26.06.2015.

3. "Whether on the facts and circumstances of the case and in law the Ld. CIT(A) failed to appreciate the fact that onus is on the assessee to explain and substantiate the transaction of outstanding cash loan balance during the FY 2015-16 relevant to the AY 2016-17 which the assesse failed to substantiate with the documentary evidences during the assessment and appeal proceedings. 4. "The appellant prays that the order of the CIT(A) on the above ground be reversed and that of the Assessing officer be restored.

5. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary."

3. The assessee has raised the following grounds of objections:

1. No concrete corroborated evidence for investment in any identified asset by the assessee, therefore Ld CIT(A) is correct in deleting addition u/s 69 of the IT Act of Rs. Rs.5,32,83,600/- made erroneously by the A.O. for AY 2016-17. Hence, ground no. 1 of deptt is liable to be rejected.

CO No. 273/Mum/2024 A.Y. 2016-17 Bhagwandas Bherumal Adani 2. The so called evidence seized in the search action on 3rd party 'Ahuja group' was not pertaining to assessment year 2016-17, therefore the impugned addition was beyond the scope of the Act, hence Ld. CIT(A) has rightly appreciated facts to delete the addition in this case. Hence, ground no. 2 of deptt is liable to be rejected.

3.

As there was no such transaction as also highlighted by the legal heir in affidavit dated 28/02/2023 which was filed before CIT(A), therefore question of further explaining by assessee does not arise. Hon'ble ITAT may please note that the contents of the affidavit have not been disapproved by the department, therefore, ground no. 3 of deptt is liable to be rejected.

4. The assessee prays that the order of the CIT(A) on three grounds taken by the department can not be reversed, therefore the same may be upheld.

5.

The assessee craves leave to amend or alter any ground or add a new ground which may be necessary as advised by the advisor in due course of time.”

4.

Brief facts of the case are that the assessee filed return declaring income of Rs. 11,10,160/- on 03.08.2016 for AY 2016-17. As per the information received by Ld. AO, a search was conducted in the case of Ahuja Group and related persons on 25.06.2015, wherein it was found that the group had engaged in obtaining unaccounted cash loans. The assessee’s name was found in the list of persons who had paid cash loans. On the basis of this information regarding an unaccounted cash loan of Rs. 5,32,83,600/- given by the assessee to Ahuja Group the case was reopened and notice u/s 148 was issued. . It was noticed that an amount of Rs. 5,32,83,600/- was reflected in the name of the assessee as on the date of the search in the seized documents. Accordingly, Ld. AO treated the cash loan amounting to Rs. 5,32,83,600/- as undisclosed income and added the same u/s 69 of the Act. Ld. AO relied on the statements of Shri Jagdish Ahuja and other employees of the group, recorded during the course of search, wherein they had explained the modus operandi of the group. Specifically, in the statement recorded on 28.06.2015 in answer to question CO No. 273/Mum/2024 A.Y. 2016-17 Bhagwandas Bherumal Adani Nos. 15 and 16 relating to the assessee, it was admitted by Shri Ashok Gacheria that the cash transactions of Rs. 35,00,000/- had been made by the assessee. It was further noted by the Ld. AO that the Ahuja Group had gone to the Settlement Commission, and an amount of Rs. 5,84,38,000/-, clearly stating the narration as ‘Bhagwandas Adani cash loan’ was also included in the total income disclosed aby the group. Accordingly, Ld. AO prepared a draft assessment order u/s 144C(1) proposing to add this amount to the assessee’s income against which he was required to file his objections before the Dispute Resolution Panel (DRP) within 30 days of receipt of the order . As no objection was filed, the assessment was finalised u/s 147 r.w.s. 144C(3) of the Act at an income of Rs. 5,43,93,760/-.

5. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). Ld. CIT(A) observed that the seized papers mentioned repayment of loan by Ahuja Group to Bhagwandas Adani of Rs. 12.50 lakh, 5 lakh & 17.50 lakh on 02.08.2012, 03.08.2009 and 04.09.2012, respectively. Thus, the total of such repayment, as per seized documents, was Rs. 35 lakh. Other than this, no other amount of cash received or repaid back was mentioned in any of the seized documents. Further, in the paper book submitted before the Settlement Commission by Ahuja Group, the amount of Rs. 4,84,38,000/-, Rs. 47,17,200/- and Rs. 75,400/- were shown as loan outstanding in the name of the assessee, but the year in which these amounts were received was not CO No. 273/Mum/2024 A.Y. 2016-17 Bhagwandas Bherumal Adani mentioned. Ld. AO has made the entire addition in AY 2016-17, but there was no evidence in the seized documents or in the paper book submitted before the Settlement Commission that the amount of Rs. 5,32,83,600/- was received by Ahuja Group from the assessee during AY 2016-17. Accordingly, Ld. CIT(A) deleted the addition with the following observations: “6.3.6 In view of the above discussion, the A.O. was not justified to make addition u/s. 69 of Rs.5.32,83,600/- in A.Y 2016-17 on account of cash loan given by the late appellant to Ahuja group. Thus, the addition of Rs.5.32,83,600/- made by the A.O. u/s.69 is deleted. However, the. A.O. may examine the financial year in which the loan was given by the appellant to Ahuja group and take action as per I.T. Act, if necessary”

6.

Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before the Tribunal. Ld. AR has reiterated the submissions made before Ld. CIT(A). He has vehemently argued that even if any cash loan had been given by the assessee to the Ahuja Group, it should have been considered in the year mentioned in the seized documents. There was no justification for Ld. AO to add the entire amount of Rs. 5,32,83,600/- in the hands of the assessee during the year under consideration without ascertaining the year(s) in which the loans had been given.

7.

Ld. DR, on the other hand, has heavily relied on the assessment order and has pointed out that the documentary evidence seized as well as the statements recorded during the search clearly point to undisclosed cash transactions between the assessee and Ahuja Group. He, therefore, argued that the order of Ld. AO deserves to be upheld.

CO No. 273/Mum/2024 A.Y. 2016-17 Bhagwandas Bherumal Adani 8. We have heard the rival submissions and perused the material placed before us. We find that there was no evidence whatsoever to establish that any amount of cash loan was given by the assessee to Ahuja Group during the year under consideration. The only seized documents relating to Rs. 35 lakh cash loan pertain to FY 12-13 and before. Thus, Ld. CIT(A) has rightly directed the Ld. AO to examine the financial years in which the loan was given to Ahuja Group by the assessee and take action, if necessary, in the relevant year. We, therefore, hold that there was no justification for making the addition u/s 69 of the Act of Rs. 5,32,83,600/- in this year, hence there is no reason to interfere with the order of Ld. CIT(A).

9.

In the result, the appeal of the revenue is dismissed, and the cross- objection of the assessee is allowed. Order pronounced in the open court on 13.05.2025.

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