SHRI GANESH BHIVRAJ BHUTADA,PUNE vs. ACIT, CENTRAL CIRCLE1(1), PUNE, PUNE

During the course of assessment proceedings copies of relevant seized material and incriminating documents containing notings evidencing the money lent transactions were provided to the assessee, the details of which are as under:

Bundle/Page No. Amount as Actual Interest in F.Ys. Sr. (For the Period) per seized Amount (Rs.) 2016-17 2017-18 No. document 1 B-5/pg (black) 600.00 6,00,00,000/- 66,75,000/- 36,00,000/- 2 B-5/pg.59 300.00 3,00,00,000/- 9,00,00,000/- 66,75,000/- 36,00,000/-

8. So far as the addition of Rs.3 crore is concerned, the Ld. CIT(A) sustained the addition made by the Assessing Officer by observing as under:

“15. The appellant has raised a contention that no addition can be made merely on the basis of material seized from the premises of a third party. In support of this, the appellant has relied on various case-laws. I have considered this plea of the appellant. In this connection, it may be mentioned that the addition is made on the basis of meticulous and detailed information contained in the seized material which is further corroborated by the statement of Shri Ashok B Jain, in the statement recorded u/s 132(4) of the Act. Thus, it cannot be said that the addition was made merely on the basis of seized material in a third-party case. 16.1 It is a well settled legal position that the provisions of Indian Evidence Act do not strictly apply to income tax proceedings because the income tax proceedings are civil proceedings and not criminal proceedings as held in the case of CIT v. Swarup Cold Storage and General Mills [1982] 136 ITR 435 (All.). Also, the jurisdiction Tribunal in the case of Arvind M Kariya vs. ACIT (2013) 153 TTJ 0422 (MUM) has held that income tax proceedings are civil proceedings and the degree of proof required is by preponderance of probabilities. The principle of preponderance of probability means that a fact is said to be proved when, after considering the matters before it the Court considers its existence so probable that a prudent man ought under the circumstances of the particular case, to act upon the supposition that it exists. 16.2 The Hon'ble Bombay High Court in the case of Smt. Rajrani Gupta vs DCIT [2012] 27 taxmann.com 235 (Bombay) after relying on the judgement of Hon'ble Supreme Court in the case of Sumati Dayal v. CIT [1995] 80 Taxman 89 (SC) has observed as under: 33 ……………….In matters such as these all facts are within the knowledge of the appellant and therefore the department is not expected to prove its case with mathematical precision but a degree of probability of a prudent man taking into account the probable behaviour of a reasonable man along with surrounding circumstances…… 16.3 An almost identical situation has been dealt by Hon'ble ITAT, Delhi Bench in the case of Hersh V Chadha vs DDIT [2011] 9 taxmann.com 1 (Delhi) wherein on the basis of admission of M/s Bofors of paying commission over and above what was disclosed in books, the Hon'ble ITAT upheld the addition on account of unaccounted commission, in the hands of Mr. Chadha. Various observations made by Hon'ble Tribunal in this case are as under:- i. The dispute concerned the determination of the income-tax liability of the assessee rather than fixing any criminal liability or accountability of the assessee for any other law or obligation. The admissibility of documents, evidence or material differs greatly in income-tax proceedings and criminal proceedings respectively. In criminal proceedings, the charge is to be proved by the State against the accused establishing it beyond doubt, whereas as per the settled proposition of law, the income-tax liability is ascertained on the basis of the material available on record, the surrounding circumstances, human conduct and preponderance of probabilities [Para 6.1] ii. Rules of evidence do not govern the income-tax proceedings, as the proceedings under the Income-tax Act are not judicial proceedings in the sense in which the phrase „judicial proceedings' is ordinarily used. The Assessing Officer is not fettered or bound by technical rules about evidence contained in the Indian Evidence Act and he is entitled to act on material which may not be accepted as evidence in a Court of law. [Para 6.3] iii. It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence in income-tax proceedings. Circumstantial evidence is evidence of the circumstances, as opposed to direct evidence it may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact In the appreciation of circumstantial evidence, the relevant aspects as laid down from time to time are -  the circumstances alleged must be established by such evidence, as in the case of other evidence;  the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence;  although there should be no missing links in the case, yet it is not essential that every one of the links must appear on the surface of the evidence adduced, some of these links may have to be inferred from the proved facts;  in drawing those inferences or presumptions, the authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case;  The circumstantial evidence can, with equal facility, be resorted to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the process of arriving at the truth [Para 6.13] iv. It will also be worthwhile to consider the nature of burden of proof on the Assessing Officer for proving a fact or circumstance in the income- tax proceedings. The questions raised about the tax liability by the Assessing Officer are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation is contradictory, drawing of suitable inferences and estimation of facts is inevitable. The Courts generally will not interfere with such estimate of facts, unless the inferences or estimates are perverse or capricious [Para 6.14] 17. The ratio laid down by above case-laws is clearly applicable to the facts of the present case and therefore following the above case-laws and discussion made earlier in this, it is held that the appellant has paid 'on-money' in cash amounting to Rs.1,42,81,000/- to M/s Hiranandani Properties Private Limited for the flat no.2202, Orchid, Hiranandani Meadows, Thane. The ground no.1 raised by the appellant is DISMISSED.

18. Another contention raised by the appellant is that he was not provided the cross examination of Shri Ashok B Jain and thus, the assessment order should be held as invalid. In this connection, it may be stated that it is not the claim of the appellant that he requested the assessing officer to allow cross-examination of Shri Ashok B Jain and the AO did not allow the same. The appellant has not submitted any document/letter suggesting that any request of cross-examination was made before the assessing officer. It is a settled legal position that after foregoing its right of cross-examination at the stage of assessment proceedings, the appellant now cannot take this plea at this stage that it was not provided the opportunity of cross-examination. This position has been upheld by Hon'ble High Court of Calcutta in the case of Hindustan Tobacco Company vs CIT 211 Taxman 11 (Cal.) The relevant portion of the said decision is reproduced as under - 34. If the assessee felt that cross-examining of any person was necessary for establishing its case it was incumbent upon the assessee to make such prayer before the Assessing officer during the assessment proceeding. If a party fails to avail of the opportunity to cross-examine a person at the appropriate stage in the proceeding, the said party would be precluded from raising such issue at a later stage of the proceeding. Therefore, the belated claim of the assessee at the appellate stage that it was denied the opportunity of cross-examining witnesses in the assessment proceeding is wholly untenable in law.

20. Even otherwise, the legal position of providing cross examination in income tax proceedings is as under 20.1 It is a well settled law that the strict provisions of the Indian Evidence Act do not apply to income-tax proceedings and the Income Tax authorities are not bound by the technical rules of evidence. It has been held at various judicial forums that what is important for income tax proceedings is observance of principle of natural justice and strict rules of evidence does not apply. In the case of CIT v Metal Products of India 150 ITR 714 Punjab & Haryana High Court has held that “…..strict rules of evidence, as are known to the Indian Evidence Act are not applicable to income-tax proceedings and thus the word 'evidence in the income-tax proceedings has to be understood in the generic sense.” 20.2 In the case of GTC Industries Ltd. v ACIT 65 ITD 380, ITAT Mumbai Bench has relied upon the judgment of Calcutta High Court in the case of Kisanlal Agarwalla v. Collector of Land Customs AIR 1967 & Cal. 80 and has observed - 90. There is a good deal of misconception on this question of the right of cross-examination as part of natural justice. Natural justice is fast becoming the most unnatural and artificial justice and for that confusion the Courts are no less responsible than the litigants. Ordinarily the principle of natural justice is that no man shall be a judge in his own cause and that no man should be condemned unheard This latter doctrine is known as audi alteram partem, it is on this principle that natural justice ensures that both sides should be heard fairly and reasonably. A part of this principle is that if any reliance is plated on evidence or record against a person then that evidence or record must be placed before him for his information, comment and criticism. That is all that is meant by the doctrine of audi alteram partem, that no party should be condemned unheard No natural justice requires that there should be a kind of a formal cross-examination Formal cross-examination is procedural justice It is governed by rules of evidence. It is the creation of Courts and not a part of natural justice but of legal and statutory justice Natural justice certainly includes that any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it whether it (sic), by way of interrogation or by way of comment does not matter. So long as the party charged has a fair and reasonable opportunity to see, comment and criticise the evidence, statement or record on which the charge is being made against him the demands and the test of natural justice are satisfied. Cross-examination in that sense is not the technical cross-examination in a Court of law in the witness-box." (emphasis supplied) Further, in para 105, following has been observed - “105 In our opinion right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, 'audi alteram partem. The principles of natural justice do not require formal cross-examination Formal cross-examination is a part of procedural justice It is governed by the rules of evidence and is the creation of Court It is part of legal and statutory justice and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross- examination. However, id a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination. Adverse evidence and material, relied upon in the order to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature." 20.3 In the case of Nokia India (P.) Ltd. v DDIT 59 taxmann.com 212 ITAT Delhi Bench has held that:- Whether cross-examination is to be provided or not depends upon the facts of each case and there is no thumb rule or straight tight jacket formula facts of each case whether principles of natural justice have been complied with or not. If decision making authority has provided due opportunity to the person complaining of non-observance of principles of natural justice then it is for the person so complaining to demonstrate the same and show the prejudice caused to him Mere bald assertion of non-observance of the principles of natural justice is of no consequence." 20.4 In the case of Kolte Patil Developer to 1483/2013 dated 20.02.2015, Hon'ble ITAT (Pune) has held.-

"Be that as it may, in our considered opinion, cross-examination of the suppliers would become material only when the assessee is able to demonstrate with certain primary evidence that the statements given by the suppliers are wrong or that they do not reflect the correct state of affairs. In this context assessee has merely referred to the purchase bills issued by the suppliers and the cheque payments made So however, there is no other evidence, namely, GRNs octroi receipts, delivery challans, etc which would show that the supplies were indeed made. Therefore, in such a situation, can the absence of cross-examination be fatal to the addition in question?, especially when at the initial stage, an opportunity of cross-examination was indeed allowed, which could not be availed for the reasons we have already stated above In our view, the night of cross-examination is not automatic, but it would be incumbent only in a situation where the assessee is able to prima facie demonstrate that the onus cast on him to establish his version of affairs is based on primary evidence in this case, the assessee had failed to lead any primary evidence, viz GRNs, octroi receipts, delivery challans etc which would show that the supplies were indeed made (para 24) 20.5 Where there are sufficient materials before the Assessing Officer/Appellate Authorities, the opportunity of cross-examination may not be given, being irrelevant. In the case of Smt. Kusum Lata Thakral v CIT 150 ITR 714 Punjab & Haryana High Court has held that it was clear from the findings recorded by the Tribunal that there was no relationship between the donors and the assessee and there was no natural love and affection. The Tribunal had followed the judgment of the jurisdictional High Court in Shri Tirath Ram Gupta v CIT [2008] 304 ITR 145/[2009] 177 Taxman 294 (Pun). & Har.), laying down that in the absence of natural love and affection, the gift could not be accepted as genuine. The question whether denial of opportunity of cross-examination results in violation of natural justice depends upon facts of each case. The object of cross-examination is to test the veracity of the version given in examination in chief. In the instant case, even if cross-examination was allowed and the donors who had disowned the making of gifts, were confronted and shown to be factually wrong, the same would have made no difference, as there was no natural love and affection and, in its absence, the gifts were not genuine. 20.6 Similarly, when it is not feasible to give the opportunity of cross examination due to lapse of time or a large number of beneficiaries being part of a racket, their claim for cross-examination of a witness, may not be necessary. In the case of M/s. Meghna Towers Pvt. Ltd 87 taxmann.com 329 ITAT Delhi Bench has held that where Income-Tax Department had busted racket of bogus accommodation entries and name of assessee was discovered as one of beneficiaries of alleged racket and further amounts were actually found in books of assessee to be credited in name of alleged entry operators, burden was on assessee to prove that it was not a beneficiary of racket and did not allow the ground of appeal of the assessee that the Assessing Officer had erred in not making available the said entry operators for his cross examination. 21.1 Thus, the basic principles which come out from above judicial pronouncements are as under- (i) Rule of evidence is not strictly applicable to the Income Tax Proceedings. (ii) The cross examination to be given or not, depends on the facts of individual case. (iii) In the case of accommodation entry racket, it is not feasible for the Income Tax Authorities to grant cross examination for every beneficiary. (iv) Where there are sufficient materials before the Assessing Officer/Appellate Authorities, the opportunity of cross-examination may not be given, being irrelevant. (v) The assesses cannot seek to cross examine their own witnesses who are known and connected to him and not regarded as third party, since under the rule of evidence the right to cross examine is given for the witness of the opposite party. 21.2 Considering the totality of facts of the case and the case-laws discussed above, the contention that assessment should be held invalid in the absence of the cross examination of Shri Ashok B Jain, is rejected.”

9. So far as the addition of interest of Rs.66,75,000/- being interest @ 1% per month is concerned, the Ld. CIT(A) upheld the same on the ground that while deciding the appeal of Shri Ashok B Jain, he upheld the action of the Assessing Officer that he has paid an amount of Rs.66,75,000/- to Shri Ganesh Bhutada. Since the payment of interest by Shri Ashok B Jain to Shri Ganesh Bhutada was upheld, the Ld. CIT(A) upheld the action of the Assessing Officer in making addition of interest from Shri Ashok B Jain. The relevant observations of the Ld. CIT(A) read as under: “24. The above decision in the case of Shri Ashok Jain clearly suggests that Shri Ashok Jain has admitted before the Tribunal that during AY 2017-18, he had received cash loan of Rs.3,00,00,000/- from Shri Ganesh Bhutada and paid an interest to Shri Ganesh Bhutada amounting to Rs.66,75,000/-. The said admission was made by Shri Jain on the basis of diary seized in his case. This has been accepted by Hon'ble Tribunal meaning thereby, the Hon'ble Tribunal has held that the appellant has given a cash loan of Rs.3,00,00,000/- to Shri Ashok Jain during the year under consideration.

25. The above discussion suggests that while deciding the appeal in the case of Shri Ashok B Jain for AY 2017-18, I have held that Shri Ashok Jain had received cash loan of Rs.3,00,00,000/- from Shri Ganesh Bhutada (the appellant) and Shri Jain paid interest of Rs.66,75,000/- to the appellant on cash loans. This factual finding has also been upheld by the Hon'ble Tribunal. Therefore, following the decisions in the case of Shri Ashok B Jain for AY 2017-18, the additions of Rs.3,00,00,000/- u/s 69 of the Act for cash loan given by the appellant to Shri Ashok Jain as well as the addition of Rs.66,75,000/- towards the interest received from Shri Ashok Jain on such cash loans, are upheld. The grounds no.2 to 6 raised by the appellant, are DISMISSED”.

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant without considering and appreciating duly the facts as detailed in the statement of facts and further the detailed submissions made before him and also before the Ld. Assessing Officer during the assessment proceedings ignoring and without appreciating further the facts that the assessment order u/s.143(3) r.w.s. 153C of the I.T. Act, 1961 was passed on 29/12/2021 after issuing the notices u/s.143(2) and 142(1) of the said Act on 25/11/2021 and 29/10/2021 respectively within a month without giving reasonable and adequate opportunity of being hard to the assessee during the assessment proceedings. The assessment order therefore so passed be the Assessing Officer in violation of principles of natural justice and confirmed by Ld. CIT(A) being arbitrary, illegal and bad-in-law be quashed/set-aside.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant without considering and appreciating duly the facts as detailed in the statement of facts and further the detailed submissions made before him and also before the Ld. Assessing Officer during the assessment proceedings and virtually had passed the appellate order thereby only mentioning the contentions of the Assessing Officer in a mechanical manner without giving any cogent reasons in violation of the principle laid down by the Hon'ble Supreme Court in the case of Siemens Engg. Vs. UOI, AIR 1976 SC 1785 wherein it was held that the rule requiring reasons to be given in support of an order is like the principle of audi alteram partem, a basic principle of natural justice, which must inform every quasi-judicial process and must be observed in the proper spirit and mere pretence of compliance with it would not satisfy the requirement of law and further the Apex Court's decision in the case of CIT Vs. Walchand and Co. Pvt. Ltd (1967) 65 ITR 381 (SC) wherein it was held that the practice of recording a decision without reasons in support cannot, but be deprecated. The appellate order therefore so passed confirming two additions as raised in the grounds without application of mind merely referring to contention of the Assessing Officer and ignoring totally the contention of the appellant before the CIT(A) mechanically in violation of principle of natural justice being arbitrary, illegal and bad-in-law be quashed/set-aside.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs.3,00,00,000/- on account of amount lent by the appellant to Shri Ashok Bhavarlal Jain in cash u/s. 69 r.w.s. 115BBE of the IT Act, 1961 on the basis of merely the statement given by Shri Jain without any supporting documentary evidences in proof that such loan had at all been given by the appellant, when no such cash loans had been given by the appellant to Shri Jain from appellant's undisclosed income in violation of the principles laid down by the Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax, Central -3 Vs. Abhisar Buildwell P. Limited in Civil Appeal No. 6580 of 2021, Order dated 24/04/2023. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted.

4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs.3,00,00,000/- on account of amount lent by the appellant to Shri Ashok Bhavarlal Jain in cash u/s. 69 r.w.s. 115BBE of the IT Act, 1961 ignoring and without appreciating the facts that in the submission made before the Assessing Officer dated 10/11/2021 the appellant categorically stated vide para 3.11.2 of the said submission as quoted in page no. 7 of the assessment order that "The assessee also had never deposed that any such transactions had at all happened between the assessee and Shri Jam" thereby making such addition on the basis of documents found and seized in the premises of Shri Jain and not in the premises of the appellant and such documents had not been written or prepared by the appellant himself but some third party which, without having any corroborative evidences of the trail and fait-accompli of such transaction being not admitted by the appellant could not be treated as appellant's unexplained investment u/s. 69 of the Act as wrongly treated and added in the assessment order. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted.

5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs.66,75,000/- on account of interest income earned by the appellant from the alleged cash loans given to Shri Ashok Bhavarlal Jain as income from other sources when no such cash loans had been given by the appellant and there were no cash transactions at all which could yield interest of Rs. 66,75,000/-merely on the basis of the statement given by the third party Shri Jain and in his case such amount had been added in the assessment made for AY 2017-18 as his undisclosed income. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad- in-law be deleted.

6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs.66.75,000/- on account of interest income earned by the appellant from the alleged cash loans given to Shri Ashok Bhavarlal Jain as income from other sources when no such cash loans had been given by the appellant and there were no cash transactions at all which could yield interest of Rs. 66,75,000/-ignoring and without appreciating the facts that no such corroborative incriminating documents were found in the premises of the appellant and there was no specific mention also in the documents seized from the residence of the searched person Shri Ashok B. Jain which had revealed the amount of interest as mentioned above to have been paid by Shri Jain to the appellant and such addition was the result of only the statement of the third person Shri Jain and his action and had nothing to do with the appellant himself in violation of the principles laid down by the Hon'ble Supreme Court in the case of Principal Commissioner of income tax, Central -3 Vs. Abhisar Buildwell P. Limited in Civil Appeal No. 6580 of 2021, Order dated 24/04/2023. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted.

7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the additions of Rs. 3,00,00,000/- and Rs. 66,75,000/-both on accounts of cash loans given and so also interest on such loans received by the appellant from Shri Ashok B. Jain without any incriminating corroborative evidences found and detected by the Search/ Survey Party in the premises of the appellant but had added the same on the basis of the documents found in the residential premises of Shri Ashok B. Jain and his statement recorded u/s. 132(4) of the Act without giving any cross examination of the said person to the appellant and hence the additions made without giving cross examination to the appellant by the Assessing Officer duly confirmed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted.

8. The Appellant craves leave to add, alter, modify, substitute, and rescind any or all ground of appeal as above before or during the appellate proceedings.

11. Similar grounds have been raised in (A.Y. 2018- 19, which read as under:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant without considering and appreciating duly the facts as detailed in the statement of facts and further the detailed submissions made before him and also before the Ld. Assessing Officer during the assessment proceedings ignoring and without appreciating further the facts that the assessment order u/s.143(3) r.w.s. 153C of the I.T. Act, 1961 was passed on 29/12/2021 after issuing the notices u/s.143(2) and 142(1) of the said Act on 25/11/2021 and 29/10/2021 respectively within a month without giving reasonable and adequate opportunity of being hard to the assessee during the assessment proceedings. The assessment order therefore so passed be the Assessing Officer in violation of principles of natural justice and confirmed by Ld. CIT(A) being arbitrary, illegal and bad-in-law be quashed/set-aside.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant without considering and appreciating duly the facts as detailed in the statement of facts and further the detailed submissions made before him and also before the Ld. Assessing Officer during the assessment proceedings and virtually had passed the appellate order thereby only mentioning the contentions of the Assessing Officer in a mechanical manner without giving any cogent reasons in violation of the principle laid down by the Hon'ble Supreme Court in the case of Siemens Engg. Vs. UOI, AIR 1976 SC 1785 wherein it was held that the rule requiring reasons to be given in support of an order is like the principle of audi alteram partem, a basic principle of natural justice, which must inform every quasi-judicial process and must be observed in the proper spirit and mere pretence of compliance with it would not satisfy the requirement of law and further the Apex Court's decision in the case of CIT Vs. Walchand and Co. Pvt. Ltd (1967) 65 ITR 381 (SC) wherein it was held that the practice of recording a decision without reasons in support cannot, but be deprecated. The appellate order therefore so passed confirming two additions as raised in the grounds without application of mind merely referring to contention of the Assessing Officer and ignoring totally the contention of the appellant before the CIT(A) mechanically in violation of principle of natural justice being arbitrary, illegal and bad-in-law be quashed/set-aside.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs.6,00,00,000/- on account of amount lent by the appellant to Shri Ashok Bhavarlal Jain in cash u/s. 69 r.w.s. 115BBE of the IT Act, 1961 on the basis of merely the statement given by Shri Jain without any supporting documentary evidences in proof that such loan had at all been given by the appellant, when no such cash loans had been given by the appellant to Shri Jain from appellant's undisclosed income in violation of the principles laid down by the Hon'ble Supreme Court in the case of Principal Commissioner of Income Tax, Central -3 Vs. Abhisar Buildwell P. Limited in Civil Appeal No. 6580 of 2021, Order dated 24/04/2023. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted.

4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs.6,00,00,000/- on account of amount lent by the appellant to Shri Ashok Bhavarlal Jain in cash u/s. 69 r.w.s. 115BBE of the IT Act, 1961 ignoring and without appreciating the facts that in the submission made before the Assessing Officer dated 10/11/2021 the appellant categorically stated vide para 3.11.2 of the said submission as quoted in page no. 7 of the assessment order that "The assessee also had never deposed that any such transactions had at all happened between the assessee and Shri Jam" thereby making such addition on the basis of documents found and seized in the premises of Shri Jain and not in the premises of the appellant and such documents had not been written or prepared by the appellant himself but some third party which, without having any corroborative evidences of the trail and fait-accompli of such transaction being not admitted by the appellant could not be treated as appellant's unexplained investment u/s. 69 of the Act as wrongly treated and added in the assessment order. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted.

5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs.36,00,000/- on account of interest income earned by the appellant from the alleged cash loans given to Shri Ashok Bhavarlal Jain as income from other sources when no such cash loans had been given by the appellant and there were no cash transactions at all which could yield interest of Rs.36,00,000/-merely on the basis of the statement given by the third party Shri Jain and in his case such amount had been added in the assessment made for AY 2018-19 as his undisclosed income. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad- in-law be deleted.

6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the addition of Rs.36,00,000/- on account of interest income earned by the appellant from the alleged cash loans given to Shri Ashok Bhavarlal Jain as income from other sources when no such cash loans had been given by the appellant and there were no cash transactions at all which could yield interest of Rs.36,00,000/-ignoring and without appreciating the facts that no such corroborative incriminating documents were found in the premises of the appellant and there was no specific mention also in the documents seized from the residence of the searched person Shri Ashok B. Jain which had revealed the amount of interest as mentioned above to have been paid by Shri Jain to the appellant and such addition was the result of only the statement of the third person Shri Jain and his action and had nothing to do with the appellant himself in violation of the principles laid down by the Hon'ble Supreme Court in the case of Principal Commissioner of income tax, Central -3 Vs. Abhisar Buildwell P. Limited in Civil Appeal No. 6580 of 2021, Order dated 24/04/2023. The addition therefore so made by the Ld. Assessing Officer duly confirmed in the appellate order passed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted.

7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in dismissing the appeal of the appellant thereby confirming the additions of Rs.6,00,00,000/- and Rs.36,00,000/-both on accounts of cash loans given and so also interest on such loans received by the appellant from Shri Ashok B. Jain without any incriminating corroborative evidences found and detected by the Search/ Survey Party in the premises of the appellant but had added the same on the basis of the documents found in the residential premises of Shri Ashok B. Jain and his statement recorded u/s. 132(4) of the Act without giving any cross examination of the said person to the appellant and hence the additions made without giving cross examination to the appellant by the Assessing Officer duly confirmed by the Ld. CIT(A) being arbitrary, illegal and bad-in-law be deleted.

“Q.18) Please state whether you are doing business in MCX / dabba trading. Ans: Earlier before two years I had done the business in MCX trading on commission basis only. However, due to losses in this business I have stopped doing this business since 2015. I would like to state that I have never done any dabba trading business. Q.19) Please state whether any records are maintained by you for the above mentioned MCX business. Ans: No. I have not maintained any record for this business activity. Q.20) Do you know Shri. Ashok Jain of Dehu Road. Please state whether you had made any business transactions with him. Ans: Yes I know Shri. Ashok Jain of Dehu Road. Earlier before two years I have done MCX trading business on commission basis. After closure of this business in 2015, I am partner of 5% with Shri. Ashok Jain in respect of MCX trading business done by him. Q.21) Please state whether any records are maintained by you for the above mentioned MCX business with Shri. Ashok Jain. Ans: No. I have not maintained any record for this business activity with Shri. Ashok Jain”

16. The ld. CIT-DR had not pointed out any deficiency in the working of the above cash flow statement. The Ld. CIT-DR‟s only objection is that the benefit of telescoping cannot be granted to the appellant-assessee as no such plea was taken in the grounds of appeal, but it is admitted fact that during the course of proceedings before the CIT(A), the ld. CIT(A) has given the benefit of telescoping of addition made in the earlier assessment years and current year, against which the department is not in appeal before the Tribunal. However, the benefit of loans borrowed, the availability of funds on bidding the bishes (chits) was ignored by the CIT(A), though this is very much evident from the entries found in the diaries.

17. As evident from the above cash flow statement, no cash deficit was found in any of the previous year relevant to the assessment year under consideration. Therefore, no addition is called for on account of unclaimed investments, which forms the basis for making additions in the assessment. Therefore, we direct the AO to delete all the additions made by the AO.”

25. From the above it is seen that Shri Ashok Jain in his cash flow statement while explaining his investments has stated to have received the cash loan of Rs.3 crores during the assessment year 2017-18. Similarly, he has stated to have received the cash loan of Rs.9 crores during assessment year 2018-19, out of which he has repaid an amount of Rs.2 crores and there is net receipt of Rs.7 crores. Although it is the submission of the Ld. Counsel for the assessee that in light of various decisions cited by him the addition cannot be made in the hands of the assessee on the basis of handwritten loose documents found during the course of search at third party premises without corroborative material, however, those decisions cannot be followed in the instant case especially when meticulous details of cash loan received by Shri Ashok Jain from Shri Ganesh Bhivraj Bhutada were found who is not a stranger to the assessee but is a partner of the assessee in MCX trading. However, once Shri Ashok Jain, for whatever reasons has maintained certain diaries according to which he has received cash loan from the assessee Shri Ganesh Bhivraj Bhutada and has also reflected such cash loan in his cash flow statement which has been accepted by the Tribunal, therefore, under these circumstances, Shri Ashok Jain must have been liable for all the consequential provisions of the Income Tax Act for accepting such cash loans and repayment of such cash loans as per the provisions of section 269SS, 269T of the Act and the consequential penalty proceedings so that it can safely be concluded that the assessee has given the cash loan. In our opinion, the assessee cannot escape from the tax liability by simply stating that the entries were found in the diary maintained by a 3rd party from whose premises the diary was seized especially when Shri Jain has already escaped from tax by showing in his cash flow statement that he has received cash loan from the assessee while explaining his investments etc. This, in our opinion is simply impossible because both are not telling the truth and one of them is correct and the other one is not telling the truth. Under these circumstances, we are of the considered opinion that if the Assessing Officer has levied penalty under the relevant provisions for accepting and repaying cash loans in the hands of Shri Ashok B Jain, then there is some authenticity that Shri Ganesh Bhivraj Bhutada must have given cash loan of Rs.3 crores during the assessment year 2017-18 and Rs.6 crores during the assessment year 2018-19 to Shri Ashok Jain and has earned the interest. Accordingly, the Assessing Officer may make the addition in the hands of Shri Ganesh Bhivraj Bhutada. However, in case the Assessing Officer has not levied the penalty for default by Shri Ashok Jain in accepting the cash loan and repaying the same, then the addition made by the Assessing Officer and sustained by the Ld. CIT(A) in our opinion should be deleted. With these observations, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to verify the records of Shri Ashok B Jain for assessment years 2017-18 and 2018-19. In case penalty proceedings are initiated for violation of the provisions of section 269SS and 269T of the Act, then the addition in the hands of Shri Ganesh Bhivraj Bhutada will be sustained. In case no such penalty proceedings have been initiated and penalty levied on account of violation of provisions of section 269SS and 269T of the Act by accepting cash loan and making repayment of such cash loan in the hands of Shri Ashok B. Jain, then no addition can be made in the hands of Shri Ganesh Bhivraj Bhutada. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.

ITA No.1132/PUN/2024 (A.Y. 2018-19)

Order pronounced in the open Court on 6th March, 2025.