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Facts
During a search and seizure operation, bank passbooks belonging to the assessee's employees and their relatives were found, showing cash deposits totaling Rs. 8.85 crores over several financial years. The Assessing Officer initiated proceedings under Section 153A, making additions based on these deposits.
Held
The Tribunal held that the seized bank passbooks constituted incriminating material. While the CIT(A) correctly upheld the initiation of proceedings under Section 153A, the Tribunal found that taxing the entire cash deposits was inappropriate. Instead, the Assessing Officer was directed to compute the peak cash credit for each assessment year.
Key Issues
Whether the bank accounts maintained in the names of employees and relatives constitute incriminating material for additions under Section 153A, and if so, whether entire deposits or peak credit is to be considered as income.
Sections Cited
153A, 69A, 132(4)
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आदेश / O R D E Rw PER JAGADISH, A.M : Aforesaid appeals filed by the assessee for Assessment Years (AYs) 2009-10, 2010-11, 2012-13, 2013-14 & 2014-15 arises out of the common order of Learned Commissioner of Income Tax, Appeals, Chennai-20 [hereinafter “CIT(A)”] dated 20.12.2024.
The facts in all the appeals of the assessee are identical and issues are common hence, we proceed to pass a common order. For brevity, we shall take up the appeal in for A.Y to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 2 -: 2009-10 as lead case. The grounds of appeal raised by the assessee for A.Y 2009-10 are as under:
1. 1. “1. The order of the learned Commissioner of Income Tax (Appeals)- 20 [CIT(A)) confirming the addition made by the Assessing Officer (AO) is contrary to law, facts, and circumstances of the case. The learned failed to see that addition made under Section 153A is without jurisdiction and deserves to be deleted.
2. The learned Commissioner of Income Tax (Appeals) erred in law and on facts in sustaining addition on peak credit basis under section 69A of the Act, even though the deposits in question were made in the respective bank accounts of the employees and relatives of the appellant, and not in the appellant's own bank account. The addition has been sustained without properly appreciating the source, ownership, and nature of the deposits, thereby rendering the addition erroneous and unsustainable in law.
3. The learned Commissioner of Income Tax (Appeals)-20 ought to have seen that the AO has erred in law and on facts in making an addition under Section 153A based on the passbook of employees allegedly found at the appellant's premises and solely relying on a statement recorded at the time of search, without any independent corroborative evidence.
The learned CIT(A) ought to have seen that passbook, being a document belonging to an employee and not the appellant, does not qualify as incriminating material under Section 153A. Accordingly, the addition made solely based on its discovery is untenable and deserves to be deleted.
5. The learned CIT(A)-20 ought to have seen that the AO erred in making an addition under the head unexplained money based on mere presumptions and suspicions without any direct material to establish that the amounts in the employee passbooks were unaccounted income of the appellant and that passbooks were used to route undisclosed cash transactions on behalf of the appellant.
6. The learned CIT(A)-20 failed to see that passbook pertains to an employee of the appellant and not to the appellant itself and that there is no evidence to suggest that the appellant-has any beneficial ownership or control over the transactions reflected in the passbook. The learned CIT(A) failed to see that the AO has made the addition without proving any direct link between the entries in the passbook and any undisclosed income of the appellant.
to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 3 -: 7. The learned CIT(A)-20 erred in not appreciating that the mere discovery of employee passbooks at the appellant's premises does not constitute valid incriminating material under the law. Passbooks belonging to third-party employees, in the absence of any corroborative evidence, do not establish any undisclosed income of the appellant. Furthermore, no transactional link or financial nexus has been demonstrated between the appellant and the deposits reflected in these passbooks, rendering the addition unsustainable in law.
8. The learned Commissioner of Income Tax (Appeals)-20 ought to have seen that the Assessing Officer (AO) erred in law and on facts in making an addition under Section 153A of the Income Tax Act, without there being any incriminating material found during the search. The learned CIT(A) failed to see that the Hon'ble Supreme Court in Pr. CIT v. Abhisar Buildwell Pvt. Ltd. (2023) 152 taxmann.com 52 (SC) has categorically held that in the case of a non-abated assessment, no addition can be made without incriminating material.
9. The learned CIT(A) failed to see that it is a settled law that no addition can be made based on mere suspicion or conjecture. The Hon'ble Supreme Court in CIT v. Daulatram Rawatmull (1973) 87 ITR 349 (SC) held that The onus is on the department to prove that an income is undisclosed and mere possession of documents without conclusive evidence of ownership or control does not justify an addition.
The learned CIT(A)-20 failed to see that the AO erred in law and on facts in making an addition purely on the basis of a sworn statement recorded at the time of search without any independent corroborative material in doing so the learned CIT(A) failed to consider the decision of the Jurisdiction High Court in the case of CIT v. S. Jayalakshmi (2018) 96 taxmann.com 486 (Mad) wherein the Hon'ble Court categorically held that a sworn statement recorded under Section 132(4) has no evidentiary value unless supported by tangible material evidence and that a mere admission in a statement, without further corroboration, cannot form the sole basis for addition.
The learned Commissioner of Income Tax (Appeals)-20 ought to have seen that a mere statement recorded during search, without corresponding incriminating material, is insufficient to sustain an addition. The learned CIT(A) ought to have seen that the AO must substantiate admissions made in sworn statements with proper inquiry and supporting evidence and an addition made without conducting any independent verification is arbitrary and bad in law.”
:- 4 -:
The brief facts of the case are that the assessee is engaged in the real estate business in the name of M/s. Singhvi Properties and is also Chairman-cum-Managing Director of M/s. Singhvi Paper Products Pvt. Ltd. & M/s. Dakshasheela Global School. A search and seizure operation u/s. 132 of the Act was carried out in the case of the assessee on 01.11.2019 at his residential and office premises. During the course of search at his residence, several bank passbooks in the names of the assessee’s employees and their relatives were found and seized. From these passbooks it was found that cash deposits had been made during Financial Years 2008-09 to 2018-19 amounting to Rs. 8.85 crores, as detailed below:
Account Holder AY AY AY AY AY AY AY AY AY AY AY 2008- 2009- 2010- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2019- Name 09 10 11 13 14 15 16 17 18 19 20 Accountant C.P. -- 2.00 2.75 25.00 26.50 13.51 10.00 28.50 26.00 -- -- Jaishankar House maid -- -- -- - -- 2.00 -- -- 2.50 -- -- Violet Carlo Devarajan -- -- -- -- 19.50 12.20 -- 23.50 36.95 19.00 -- Driver -- -- -- -- 6.00 13.50 2.00 14.50 24.55 5.00 6.50 Kubendran Accountant N. 4.23 4.00 3.06 23.38 9.50 -- -- -- -- -- -- Sankaran Sudharshan -- -- -- 4.0 9.50 5.50 3.00 -- 0.20 0.20 -- Scholl P.O -- -- -- -- -- 7.50 -- 26.50 20.50 18.00 3.00 Padmanabhan Selvam -- -- -- -- 15.0 -- -- -- -- -- -- N. Shankara’s -- -- -- -- -- 8.50 12.50 -- 24.50 19.50 2.50 father, Chinna Ponnusamy Scholl Staff, -- -- -- -- 2.00 21.50 5.00 10.50 36.00 18.00 5.50 Ravi Driver Sridhar -- -- -- -- -- 2.50 5.00 20.75 37.50 17.00 2.50 Baby J -- -- -- -- -- 15.20 18.50 33.50 38.25 44.50 4.50 Total 4.23 6.00 5.81 52.38 88.00 102.51 56.00 157.75 246.95 141.20 24.50 to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 5 -: 4. The Assessing Officer (A.O) initiated assessment proceedings u/s. 153A of the Act and made additions on account of cash deposits made in the bank accounts of the assessee’s employees and their relatives. In his statement, Shri C.P. Jaishankar, Accountant has confirmed that the cash deposited in these accounts belonged to the assessee. Other employees, Shri N. Sankaran, Smt. J. Baby, and Smt.
S. Premavathi have also confirmed the same in their sworn statements and stated that their income tax returns were being filed by Shri C.
Lickmichand Singhvi. Further, the assessee in his statement has also accepted that on-money cash receipts were deposited into the bank accounts of the employees and their relatives. Based on these statements, the A.O made addition of cash deposits in the respective year in the assessment order. Aggrieved, the assessee filed an appeal before the Ld. CIT(A). The assessee has raised jurisdictional issue, contending that no incriminating material pertaining to the relevant year was found, and the bank accounts standing in the names of employees/relatives did not relate to his transactions rather, these were accounts of loan creditors from whom loans were taken in his name/family members’ names/group concerns and were subsequently repaid by cheque/RTGS. The Ld. CIT(A), after examining the seized material, noted that the passbooks were seized from the assessee’s to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 6 -: residence and the employees had stated that the accounts were opened by the assessee and used for depositing cash through Shri C.P. Jaishankar. Shri Jaishankar also admitted in his statement under section 132(4) of the Act that cash generated from the assessee’s real estate business was deposited in these accounts as per the assessee’s instructions. Other employees made similar statements.
The assessee has also accepted that the transactions in these bank accounts were carried out for his own and his family members needs.
Accordingly, the Ld. CIT(A) held that the A.O had incriminating material in his possession and jurisdiction u/s. 153A of the Act had been correctly assumed by the A.O. He further upheld that income had escaped assessment for more than six years. On merits, after examining the material and statements, the Ld CIT(A) held that the cash deposits belonged to the assessee , but directed only peak credit should be added, after examining the pattern of deposits and withdrawals.
The Ld. Authorized Representative (A.R) of the assessee vehemently argued on the issue of jurisdiction and reiterated that the bank accounts in the names of employees and relatives belonged to them, therefore same cannot be taxed in the assessee’s hands. to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 7 -:
On the other hand, the Ld. Departmental Representative (DR), has relied on the orders of lower authorities.
We have heard the rival submissions, and perused the materials available on record. The Ld. CIT(A) has adjudicated the jurisdictional issue as under:
“6.1.2. On perusal of the submissions made by the appellant, it is seen that the main contention of the appellant against assumption of jurisdiction by the AO are as under. i. The bank accounts in which the cash was deposited do not belong to the appellant. ii. The amount of income which has escaped assessment is less than fifty lakh rupees. Firstly, it is seen that the said cash deposits were made in the bank account of the appellant's employees and their relatives and the passbooks of all these accounts were found and seized from the appellant's residential premises. During the search proceedings, the employees had stated that the appellant had opened the bank accounts in their names and used the said accounts to deposit his unaccounted cash through his staff, Shri C P Jaishankar. Shri C P Jaishankar also admitted in his sworn statement recorded u/s 132(4) of the Act that he had deposited the cash generated from the real estate business of the appellant in the said accounts as per direction of the appellant only. Other employees of the appellant like Shri N Sankaran, Smt J Baby and Smt S Premavathi also made similar deposition. Shri M Srinivasan, accountant of the appellant, in his sworn statement u/s 132(4) of the Act also stated that he had been working as an account of the appellant since 2007 and he used to get instruction from the appellant for booking excess expenses, booking of interest payment without actually payment, adjustment for real estate income, etc. The statements made by the employees were confirmed by the appellant himself in his sworn statement recorded u/s 132(4) of the Act on 02.11.2018 and also offered an additional income of Rs.3 crores to cover the issue of cash deposits in the employees' bank accounts. During the post- search proceedings also, the appellant had again offered an to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 8 -: amount of Rs. 3 crores as additional income in his hands for the FY 2018-19 in respect of the cash deposits in accounts of various employees and also filed peak cash credit statement accepting the ownership of the cash deposits.ks the said bank accounts. The appellant has never denied the fact that the passbooke for the said accounts, in which the cash deposits were made, were found from the appellant's residential premises and the appellant has not furnished any explanatioff as to why the passbooks were kept with him. In fact, the appellant has himself accepted that the transactions in the said bank accounts were done by the appellant for his own and family members' use. Thus, even though the said bank accounts de not belong to the appellant, the cash deposits in the said bank account belong to the appellant.
Secondly, as per appellant, the amount of income which has escaped assessment is Rs. 19,91,000/- only and the said variation occurs on account of the cash deposits made during the FY 2011- 12 relevant to AY 2012-13. Had there been such discrepancy, the appellant ought to have brought the same to the notice of the AO during the assessment proceedings. However, on perusal of the records, it is seen that during the assessment proceedings, the appellant had not made any such objection before the AO, whereas the AO after examining the cash deposits made in the bank accounts for the FY 2011-12 had found total cash deposit of Rs. 52,38,000/-Therefore, while issuing the notice u/s 153A for the year under consideration, the AO prima facie had in his possession documents or evidence which revealed that the income which had escaped assessment was likely to amount to more than fifty lakh rupees in aggregate in the relevant assessment years. Moreover, there was no submission or objection filed before the AO in the course of assessment proceedings. Therefore, I am of the opinion that the AO had correctly assumed jurisdiction for issuing notice u/s 153A of the Act for the year under consideration and issued notice u/s 153A for the AY 2009-10 to 2012-13. Hence, the additional ground raised by the appellant against assumption of jurisdiction by the AO is dismissed.
7.1 The undisputed fact is that bank passbooks in the names of the assessee’s employees and their relatives were found and seized from the assessee’s residence during the course of search. All the concerned employees, in their sworn statements recorded under section 132(4) of the Act, categorically stated that the said bank to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 9 -: accounts were opened at the instance of the assessee and were used for depositing the assessee’s unaccounted cash. The staff member Shri C.P. Jaishankar also admitted that he deposited cash generated from the assessee’s real estate business into these accounts under the specific instructions of the assessee. These statements stand corroborated by the assessee’s own sworn statement recorded under section 132(4) of the Act, wherein he accepted ownership of the transactions and offered additional income of ₹3 crores to cover these cash deposits.
7.2 In view of the above clear factual matrix, we hold that the seized bank passbooks constitute incriminating material relatable to the assessee and that the Ld. CIT(A) has correctly appreciated the evidences in upholding the validity of initiation of proceedings under section 153A of the Act. We find no reason to interfere with the said finding.
7.3 On merits, in paragraphs 6.2.2 and 6.2.3, the Ld. CIT(A) held that the cash deposited in the bank accounts pertained to the assessee and directed the A.O to compute the peak credit. The relevant portion of the order is reproduced below: to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 10 -: “6.2.2 In the appeal proceedings, the appellant had taken a stand that the bank accounts maintained in the name of the employees and their relatives are not related to the appellant's transaction. These persons are actually the loan creditors from whom the appellant had taken loans either in his name or in the name of family members or group concerns which were repaid subsequently by cheque/RTGS. The other transactions in the said bank accounts are the personal income of those persons which are not having bearing on the income of the appellant. This contention of the appellant cannot be accepted for the reason that the bank passbooks were seized from the residential premises of the appellant and both the employees and appellant himself had admitted in their sworn-statements that the appellant alone opened the said accounts and used to deposit the unaccounted cash available with him and immediately thereafter transferred by way of cheque/RTGS to him or his family members or his concerns. On examination of the bank statements, it is also noted that the above- mentioned fact is correct. Moreover, the appellant himself had filed a peak cash credit statement before the DDIT(Inv.) and explained that the entire cash credits are not his income and only the peak credit of the respective year alone to be considered as his income. Hence, the appellant cannot claim in the appeal proceedings that these are all genuine loan creditors and there cannot be any income arising on account of these credits in the bank accounts in the name of the employees and their relatives.
6.2.3. Now, the only issue to be decided is that to find out the correct income arising from the cash deposited in the bank accounts, whether the entire cash credits are to be considered as income as adopted by the AO or only the peak cash credit as submitted by the appellant is to be adopted. On perusal of the bank account statements of these employees and their relatives, it is noted that the cash is being deposited and immediately thereafter there is a transfer by way of cheque/RTGS to either the appellant or family members or group concerns bank accounts. Thereafter, there are transfer by way of cheque/RTGS from the appellant or family members or group concerns to these accounts again and immediately followed by cash withdrawal. This pattern has been observed in almost all the bank accounts for the entire period of more than 10 years. On these facts and circumstances, the addition of entire cash deposits as the income for the respective AY will not be a right approach or correct method to find out the income of the appellant. Hence, I am of the opinion that after examination of the nature of transactions in the said bank accounts where there are periodical cash deposits and withdrawals facilitated by the appellant for his or his relatives or concern's favour, adopting the peak cash credit will be the right approach to work out the unaccounted income arising on account of these bank accounts. In this regard, to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 11 -: the appellant had also made a submission, without prejudice, to consider the peak cash credit worked out by him in the submissions dated 25.11.2024. Subsequently, the appellant had modified the peak cash credit to the extent of approximately 2 lakhs on 12.12.2024 on account certain omissions. The peak cash credit statement submitted by the appellant bank accounts of the employees and their relatives as inflow of cash and the withdrawals from the said accounts as outflow of cash for the period commencing from 12.04.2011 to 06.02.2019. In this regard, the AO is directed to verify the peak cash credit working submitted by the appellant in the appeal proceedings with the said bank statements available in the seized material, thereafter, work out the correct peak cash credit to be adopted for the respective year(s) and tax the peak credit of the respective year(s) as income arising from these bank accounts for the respective year(s). While carrying out this exercise, the AO is directed to keep in mind the following and work out the correct peak cash credit: i. The appellant had prepared the peak for the period 12.04.2011 to 06.02.2019, whereas, the AO had considered the cash credits for the AY 2008-09, 2009-10 & 2010-11 as worked out in the assessment order. In this regard, the cash credits for AYs 2008-09, 2009-10 & 2010-11, which the appellant did not consider in his working, needs to be verified with the seized bank statements and the peak cash credit statement has to be re-worked accordingly after verifying with the appellant. ii. The AO had considered the cash credits found from the bank accounts in the name of Shri Sudarshan & Shri Selvam for the AY 2013-14. On examination of the working of peak cash credit submitted by the appellant, it was noted that the appellant did not consider the corresponding deposits from the bank accounts of Shri Sudarsan and Shri Selvam. It is only a random verification carried out by me. In this regard, the AO is directed to examine and verify the seized bank statements and the respective deposits and withdrawals vis- à-vis peak cash credit statement submitted by the appellant for the entire period from AY 2009-10 to 2019-20 and work out the peak cash credit after verifying with the appellant. iii. The appellant is also directed to provide the peak cash credit working which was submitted before me on 12.12.2024. The appellant is also directed to furnish any other necessary details called for by the AO in the verification process to work out the correct peak credit for the respective years. to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 12 -: iv. After completing the above exercise, the AO is directed to adopt the peak cash credit for the respective years as income for that AY and delete the balance addition made on account of treating the entire cash credit as an income for the respective years. With these directions, these ground raised by the appellant are partly allowed.”
7.4 The Ld. CIT(A), after detailed examination of the transaction pattern reflected in the seized bank accounts, has recorded a clear finding that the cash deposits in these accounts pertain to the assessee. The Ld. CIT(A) further observed that the assessee himself had earlier furnished peak cash credit workings before the Investigation Wing, accepting that only the peak balance represents the income component. Considering the continuous and repeated pattern of cash deposits followed by immediate transfers to the assessee or his family concerns and subsequent withdrawals, the Ld. CIT(A) held that taxing the entire deposits would not be appropriate, and therefore directed the Assessing Officer to adopt the peak cash credit for the respective years after proper verification.
7.5 We find no infirmity in the well-reasoned conclusion of the Ld. CIT(A). The directions issued for adopting peak credit, after due verification with seized material, are fair, justified, and in accordance to 648/Chny/2025 Shri Singhvi Lickmi Chand :- 13 -: with settled principles. Accordingly, the order of the Ld. CIT(A) is upheld.
7.6 Accordingly, appeal filled by assessee is dismissed.
, 640, 641 & 642/Chny/2025 for A.Ys 2010-11, 2012-13, 2013-14 & 2014-15:
We find that identical issues are involved in the assessee’s appeals for A.Ys. 2010-11, 2012-13, 2013-14, and 2014-15 also.
Accordingly, our adjudication in A.Y. 2009-10 shall apply mutatis mutandis to those years as well. Therefore, for the same reasons, the 640, 641, and 642/Chny/2025 are also dismissed.
In the result, all the five appeals filed by the assessee are dismissed.
Order pronounced on 25th day of November, 2025 at Chennai.