INCOME TAX OFFICER , MUMBAI vs. JITENDRA VALLABHJI DEDHIA, MUMBAI

The Assessing Officer issued show cause notice to the assessee requiring him to explain the source of the alleged cash transactions and why the amount of Rs. 46,00,000/- should not be treated as unexplained income.

In response to the show cause notice, the assessee denied having advanced any cash loans through Shri Nilesh Bharani to the aforesaid parties. The assessee submitted that he had never entered into any such transactions and that no evidence had been furnished to him in support of the allegation made by the Assessing Officer. The assessee further submitted that copies of the alleged incriminating documents relied upon by the Assessing Officer were never provided to him despite specific requests. It was contended that the failure of the Assessing Officer to furnish such documents resulted in violation of the principles of natural justice and deprived the assessee of an effective opportunity to rebut the allegations. It was also submitted that during the course of assessment proceedings, cross-examination of Shri Nilesh Bharani was conducted. In the said cross-examination, Jitendra Vallabhji Dedhia Shri Nilesh Bharani denied having received any cash loans from the assessee. According to the assessee, Shri Nilesh Bharani categorically stated that the assessee had only transacted with him through banking channels and that the name of the assessee or the partnership firm M/s Shah Petroleum Products had been used by him while lending loans from his own unaccounted funds. The assessee further submitted that the alleged amount of Rs. 46,00,000/- had also been considered in the hands of the partnership firm M/s Shah Petroleum Products by the jurisdictional Assessing Officer of the firm. Therefore, it was argued that taxing the same amount in the hands of the assessee would amount to double taxation of the same income.

The assessee also contended that the provisions of section 68 of the Act were not applicable to the facts of the case as there was no cash credit found in the books of the assessee. The assessee accordingly requested that the proposed addition be dropped.

The Assessing Officer did not accept the explanation furnished by the assessee. According to the Assessing Officer, the information received from the Investigation Wing along with the documents seized during the search proceedings in the case of M/s Evergreen Enterprises indicated that the assessee had advanced cash loans through Shri Nilesh Bharani. The Assessing Officer observed that statements recorded during the search proceedings and the seized documents indicated that several persons had provided funds to Shri Nilesh Bharani who, in turn, Jitendra Vallabhji Dedhia had advanced loans in cash to various parties. On the basis of the details available from the seized records and the information collected during investigation, the Assessing Officer concluded that the assessee had advanced cash loans of Rs. 46,00,000/- through Shri Nilesh Bharani.

Since the assessee failed to produce satisfactory explanation regarding the source of the alleged cash loans, the Assessing Officer treated the amount of Rs. 46,00,000/- as unexplained income of the assessee and added the same to the total income under section 68 of the Act.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee reiterated the submissions made during the assessment proceedings. The assessee contended that there was no concrete evidence to establish that the assessee had advanced cash loans through Shri Nilesh Bharani. It was submitted that the statement recorded under section 132(4) of the key persons of M/s Evergreen Enterprises did not contain any reference to the alleged transactions involving the assessee. The assessee further submitted that during cross-examination conducted before the Assessing Officer, Shri Nilesh Bharani had categorically denied having received any cash loans from the assessee. It was argued that the addition had been made merely on the basis of suspicion without any corroborative evidence. It was also contended that the Assessing Officer had not discussed the objections raised by the assessee nor brought on record any material to establish that Jitendra Vallabhji Dedhia the assessee had actually advanced cash loans of Rs. 46,00,000/-.

The learned CIT(A) considered the submissions made by the assessee and examined the assessment order. The learned CIT(A) observed that the Assessing Officer had not brought on record any concrete evidence to support the allegation that the assessee had advanced cash loans through Shri Nilesh Bharani. The learned CIT(A) further observed that the statements recorded during the search proceedings did not contain any specific reference to the assessee having advanced cash loans through M/s Evergreen Enterprises. It was also noted that the Assessing Officer had not dealt with the objections raised by the assessee and had failed to establish the nexus between the assessee and the alleged cash transactions. After considering the submissions of the assessee and the material available on record, the learned CIT(A) came to the conclusion that the addition made by the Assessing Officer was not sustainable. Accordingly, the learned CIT(A) directed the Assessing Officer to delete the addition of Rs. 46,00,000/-.Consequently, the appeal of the assessee was allowed.

Aggrieved by the order of CIT(A), the Revenue is in appeal before us raising following grounds of appeal:

During the course of hearing, the learned Authorised Representative for the assessee submitted that the present appeal filed by the Revenue is not maintainable in view of the monetary limits prescribed by the CBDT for filing appeals before the Tribunal. It was submitted that the tax effect arising out of the impugned addition is much below the threshold prescribed under the relevant CBDT Circular governing the filing of departmental appeals before the Tribunal.

The learned Authorised Representative further drew our attention to the order of the learned CIT(A) and submitted that the addition of Rs. 46,00,000/- made by the Assessing Officer under section 68 of the Act had been deleted after due consideration of the facts of the case and the submissions of the assessee. It was contended that the learned CIT(A) has recorded Jitendra Vallabhji Dedhia categorical findings that no material evidence had been brought on record by the Assessing Officer to establish that the assessee had advanced cash loans through Shri Nilesh Bharani or through M/s Evergreen Enterprises.

Per contra, the learned Departmental Representative supported the assessment order passed by the Assessing Officer and relied upon the findings recorded therein. It was submitted that the Assessing Officer had made the addition on the basis of information received from the Investigation Wing during the course of search action carried out under section 132 in the case of M/s Evergreen Enterprises. With regard to the objection raised by the learned Authorised Representative of the assessee regarding the maintainability of the appeal in view of the monetary limits prescribed by the CBDT Circular, the learned Departmental Representative submitted that the present case falls within the exceptions provided in the said circular.

We have heard the rival submissions and perused the material available on record. At the outset, the learned Authorised Representative of the assessee raised a preliminary objection regarding the maintainability of the appeal filed by the Revenue in view of the monetary limits prescribed by the CBDT for filing appeals before the Tribunal.

From the record it is noticed that the addition made by the Assessing Officer amounts to Rs. 46,00,000/-, which was deleted by the learned CIT(A). The tax effect arising from the said addition, as pointed out by the learned Authorised Jitendra Vallabhji Dedhia Representative, is Rs. 14,21,400/-. Thus, the tax effect involved in the present appeal is only Rs. 14,21,400/-.The CBDT has issued Circular No. 05/2024 dated 15.03.2024 prescribing the monetary limits for filing appeals by the Department before various appellate forums. As per the said Circular, the monetary limit for filing appeals before the Income Tax Appellate Tribunal is Rs. 60,00,000/-. The said Circular has been issued with a view to reduce litigation and to ensure that appeals are not filed by the Department in cases where the tax effect is below the prescribed threshold.

In the present case, the tax effect of Rs. 14,21,400/- is admittedly much below the monetary limit of Rs. 60,00,000/- prescribed under the aforesaid Circular. The learned Departmental Representative has submitted that the present case falls within the exceptions provided in the Circular on the ground that the addition relates to accommodation entries and organised tax evasion. However, we find that except making a general submission, the Revenue has not demonstrated with any material on record that the present case falls within any of the specific exceptions enumerated in the CBDT Circular. Merely because the information was received from the Investigation Wing in relation to search proceedings conducted in the case of M/s Evergreen Enterprises would not automatically bring the case within the exception category contemplated under the Circular.

Therefore, in absence of any material to establish that the case falls within the specified exceptions, the appeal filed by the Jitendra Vallabhji Dedhia Revenue is hit by the monetary limit prescribed in CBDT Circular No. 05/2024 dated 15.03.2024 and is therefore liable to be dismissed.

Even otherwise, we find that the learned CIT(A) has examined the issue on merits and recorded a categorical finding that the Assessing Officer has not brought any concrete evidence on record to establish that the assessee had advanced cash loans through Shri Nilesh Bharani or through M/s Evergreen Enterprises. We find no infirmity in the above findings recorded by the learned CIT(A). The learned CIT(A) has rightly observed that the Assessing Officer has not brought on record any material evidence to substantiate the allegation that the assessee had advanced cash loans of Rs. 46,00,000/- through Shri Nilesh Bharani. The deletion of the addition by the learned CIT(A) is therefore justified.

Accordingly, the appeal filed by the Revenue is dismissed both on account of low tax effect in terms of CBDT Circular No. 05/2024 dated 15.03.2024 as well as on merits.

In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 12.03.2026.