MAHENDRA SINGH RATNAWAT,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR

Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh xxu xks;y] ys[kk lnL;] ds le{k
BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 223/JPR/2024
fu/kZkj.k o"kZ@Assessment Year : 2018-19
Central Circle-2,
Jaipur.
LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFBPR0768Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri S.R. Sharma, C.A.,

Shri R.K. Bhatra, C.A.
jktLo dh vksjls@Revenue by : Mrs. Alka Gautam, CIT-DR lquokbZ dh rkjh[k@Date of Hearing

: 13/08/2025

mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 15/09/2025

vkns'k@ORDER

PER: DR. S. SEETHALAKSHMI, J.M.

This is an appeal filed by the assessee against the order of ld. CIT (A)-4,
Jaipur dated 29.12.2023 passed under section 250 of the I.T. Act, 1961, for the assessment year 2018-19. 2. The assessee has raised the following grounds of appeal :-

“1. That on the facts and in the circumstances of the case, the ld. CIT (A)is wrong, unjust and has erred in law in upholding the finding recorded by the ld. AO that cash of Rs. 51,77,600/- found with the appellant at the time of search allegedly remained

2
Sh. Mahendra Singh Ratnawat, Jaipur.

unverified and thereby confirming addition of said amount of Rs. 51,77,660/- to the income of the appellant as unexplained money u/s 69A of the IT Act, 1961. 2. That on the facts and in the circumstances of the case, the ld. CIT (A) is wrong, unjust and has erred in law in confirming disallowance made by the AO to the extent of Rs. 1,27,33,677/- out of interest expenses claimed by the appellant by invoking provisions of sec. 37 of the IT Act, 1961. The ld. CIT (A) is further wrong and has erred in law in not admitting details of interest etc. submitted during course of hearing of appeal on the ground that they were not submitted before the AO. The CIT (A) should have forwarded these details to the AO for his comments thereon.

The ld. AR of the assessee while submitting the Written Submission, has taken an Additional Ground, which reads as under :-

Additional Ground :
That the facts and circumstances of the case, the learned AO is wrong and has erred in law in directing that the addition of Rs. 51,77,600/- made vide Ground No. 1 will be chargeable to tax u/s 115BBE of the IT Act, 1961 @ 60% in as much as the learned AO invoked the provision of said section without giving any show cause notice to the appellant.

merits. Consequently, as per the ratio laid down by the Hon’ble Apex Court in the case of NTPC vs. CIT (1998) 229 ITR 383 (SC) the new plea is admissible.
Therefore, the additional ground raised by the assessee can be adjudicated on the basis of the facts and material available on the assessment record. Thus when the additional ground is not raising a new issue or plea, then in the facts and circumstances of the case, we admit the additional ground raised by the assessee for adjudication on merit.

4
Sh. Mahendra Singh Ratnawat, Jaipur.

except cash of Rs. 51,77,600/- found from the residence of the assessee. Notice under section 143(2) of the IT Act, 1961 dated 13.02.2019 was issued and served upon the assessee through speed post. Notice under section 142(1) of the Act along with a questionnaire was also issued requiring the assessee to furnish information/details pertaining to the case relevant to the assessment year 2018-19. In compliance to the said notices, the ld. A/R of the assessee attended and furnished information and/or details called for. The AO examined the same and placed on record.

During the assessment proceedings, the assessee was asked to furnish explanation along with documentary evidence in respect of the cash of Rs.
51,77,660/- found from the residence of the assessee. Before the AO, the assessee admitted that the cash so found belonged to him only and the same is verifiable from his cash book. The reply of the assessee was considered but could not be found tenable for the reasons discussed by the AO in his order. The assessment was completed under section 143(3) read with section 153A of the IT Act, 1961
vide assessment order dated 27.12.2019 at a total income of Rs. 6,80,39,580/- by making an addition of Rs. 51,77,660/- on account of cash found during the course of search and disallowance of interest amounting to Rs. 1,27,33,677/- out of the total interest expenditure of Rs. 2,00,12,603/-. The assessee being aggrieved with the order of the AO, preferred an appeal before the ld. CIT (A), who in turn

5
Sh. Mahendra Singh Ratnawat, Jaipur.

rejected the submissions and documentary evidences furnished during the course of appellate proceedings and upheld the addition of Rs. 51,77,600/- cash found from the residence of the assessee and confirmed the disallowance of Rs.
1,27,33,677/- out of interest expenses claimed by the assessee.

Now, the assessee has come in appeal before the Tribunal on the grounds mentioned herein above.
5. Before us, the ld. AR of the assessee submitted his written submissions, which are being reproduced hereunder :-

“Ground wise Submission :

1(i)
The first ground of appeal is challenging to the addition of Rs. 51,77,600/- on account of alleged unexplained money u/s 69 of the IT Act, 1961 on account of cash found during the course of search dated 2nd& 3rd August, 2017. Succinctly facts of the case that during the course of search, the above said cash was found at residence of the appellant and a statement u/s 132(4) of the IT Act, 1961 was recorded during the course of search proceedings. The relevant questions and answers are Question
No. 13, 14, 15, 16, 17, 19, 23 and 24. Aof the said statement is submitted herewith along with certified typedfor easy reading, as the photo copy of the statement supplied by the IT department is not clearly visible. However, for sake of convenience and ready reference, the said questions and answers are reproduced here in below :-

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6
Sh. Mahendra Singh Ratnawat, Jaipur.

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7
Sh. Mahendra Singh Ratnawat, Jaipur.

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1(ii)
From the above said questions put by search team and answers thereof given by the appellant, it is evident and verifiable that the appellant has categorically explained
/submitted that the cash found at his residence was sale proceeds of River Sand (Bajri).
The appellant also submitted that out of the total cash found, a sum of Rs. 42,35,000/- were found in the bed room of his younger brother, who is a bank employee. The cash was given by the appellant to deposit in his bank account. Further, it is worthwhile to submit here that in answer to questions No. 23 and 24, on which basis, the learned AO made the addition and upheld by the learned CIT (A), the appellant has submitted that the cash found was out of the sale proceeds of Bajri business. Further, he honestly stated the correct facts that at a particular time, he was unable to get verified from books of accounts. In this connection to arrive at the correct facts and situation, it is worthwhile to explain the nature of appellant’s business. The appellant was an authorized agent /
contractor of Rajasthan State Government Mining Department to collect royalty on the River Sand Mining (Bajri) for and on behalf of the State Government. The method and procedure of collection of the said royalty (also available on Mining Department Portal) was that the Mining Department issues serially numbered and signed stamp receipt books for collection of royalty to the contractor appellant on monthly basis. The appellant for collection of the royalty, established royalty collection check posts, naka / points in the allotted leased area from the vehicles transporting the River Sand (Bajri). For collection /
royalty amount serially numbered cash receipts from the receipt book(s) issued by the Mining Department is / are being issued to the transporting vehicle driver and the original copy of the receipt(s) is given to the respective vehicle driver(s) and carbon copy thereof has been kept / retained as office copy. As submitted supra that the receipt book(s) for royalty collection are issued by Mining Department on monthly basis and by the end of 7th working day of next month, a statement / return has to be submitted to Mining
Department having the particulars of date wise collection of royalty amount and receipt number(s) along with copy of the used receipt books. The appellant besides a contractor for royalty collection was also a Government Authorized Dealer to sale the River Sand
(Bajri). Thus, as per above method / nature of business, entire receipts were collected at the royalty collection check post-points and more than 90% expenditures have also been incurred at the said business places i.e. royalty collection check posts / points.
Accordingly, main accounting and primary records have been maintained at various royalty collection check posts. At the time of search, the said record was lying at work site(s), further the business administrative cum head office is situated at Jaipur and then final accounting work is done on computer / e-accounting on the basis of particulars /

8
Sh. Mahendra Singh Ratnawat, Jaipur.

details of receipts and expenditures forwarded periodically to head office by various royalty collection check posts. In view of the above accounting system and modus- operandi of business, no physical books of accounts were available at residence of the appellant. The computer(s) in which accounting has been done were maintained installed at Head Office and hard disc(s) having accounting datas file(s) were seized by the IT Department. The said hard disc(s) is / are still lying seized with the learned AO. As per above facts and system of accounting, by no stretch of imagination, it can be said that a copy of cash book entries and reconciliation statement of cash found, filed with the DDIT
(INV-2) and also with the learned AO was an afterthought of the appellant.

1(iii) As per above facts and circumstances of the case, the adverse inference drawn by the learned AO for making an addition of Rs. 51,77,600/- that the cash available with the appellant at the time of search was not as per books of accounts, is in correct. Further, the learned CIT(A) upheld the addition without appreciating the correct facts of the case. In this regard, the appellant further clarifies and submits that in the statement recorded u/s 132(4) he only stated that at that particular point of time, he was unable to verify the said cash found from the books of accounts and the acceptance as an income and to pay the income tax on the said amount in the financial year 2017-18 was because of undue pressure mounted by search team on appellant.

1(iv)
During the course of assessment proceedings, the appellant reiterated his earlier submission and explained that the cash found during the course of search are recorded in regular books of accounts. For verification of the facts, he submitted copy of cash book from 1st April to till date of search i.e. 2nd August, 2017. It was further submitted by the appellant that the opening cash in hand as on the date of search was much more than the cash found during the course of search. Further, the said cash in hand position was worked out / prepared on the basis of seized books of accounts lying with the learned
Assessing Officer. A copy of said cash in hand statement and copy of cash book entries for 15 days prior period to the date of search were also filed with the learned CIT(A).
Copy of the said documents are submitted PBP……… Further, it is pertinent to submit here that the learned AO has not noticed / pointed out any mistake in the said cash in hand statement prepared from the seized record, filed during the course of assessment proceedings and also with the learned CIT(A).

1(v)
Further, it is evident from the assessment order that the learned AO and learned
CIT(A) have completely relied upon the statement of the appellant recorded u/s 132(4) of the IT Act 1961 vide answer to question No. 24 thereof, in which the appellant accepted / agreed to pay tax on the cash found during the course of search, under tension state of mind and duress circumstances. As now, it is a settled position of law that the admission by the assessee is an extremely important piece of evidence but it cannot be a 9
Sh. Mahendra Singh Ratnawat, Jaipur.

conclusive and the assessee may later shows that the admission mode was in correct. The submissions are driving support by the following judgments :-

(a)
Pullangode Rubber Produce Company Ltd. Vs State of Kerala & Another, (1973) 91
ITR 0018 (SC) – The Hon’ble Supreme Court held that the admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made admission to show that it is incorrect and the assessee should be given proper opportunity to show the correct state of affairs.
(b)
Taxmann.com 49 (Madras) - The Hon’ble High Court held that wherein retraction made during the course of assessment proceedings was entertained and relief was granted on merits of the explanation.
(c)
CIT Vs Sunil Aggarwal [2015] 64 taxmann.com 107 (Delhi)- the Hon’ble Court held that whether since assessee did not simply retract statement made during search and he also offered an explanation for amount of Rs. 86 lakhs and this was verifiable from books of account, impugned addition of Rs. 86 lakhs was not justified – Held, yes
(d)
192(SC) – The Hon’ble Court held that if, two views are possible, the view in favour of the assessee should be preferred.
(e)
CIT Vs K.Y. Pilliah& Sons, (1967) 63 ITR 411 (SC)
(f)
ACIT, Central Circle, Ajmer Vs. Shri Devendra Kumar Choudhary 2-S-10 to 2-S-18,
Basant Vihar, Bhilwara, ITA No. 828/JP/16
(h)
CIT, Central –II, Mumbai Vs Omprakash K. Jain (2009) 178 Taxman 179 (Bombay)
(k)
Mehta Parikh & Co. Vs CIT (1956) 30 ITR 181 (SC)
(l)
The case laws relied upon by the learned CIT(A) are distinguishable on the facts of the appellant’s case. The appellant submits the case wise facts of the said case laws herein under :-

10
Sh. Mahendra Singh Ratnawat, Jaipur.

(a)
Commissioner of Income-tax v. Hotel Meriya [2010] 195 Taxman 459 (Kerala) /
[2011] 332 ITR 537 (Kerala) [26.05.2010] – “What is evidence? We shall examine it first. Evidence is defined in section 3 of the Evidence Act as follows :

“Evidence” :- “Evidence” means and includes – (1) all statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry, such statements are called oral evidence.”

(2) all documents including electronic records produced for the inspection of the Court, such documents are called documentary evidence.”

The ‘Court’ mentioned above in the definition of evidence would include all persons, except arbitrators, legally authorized to take evidence as defined under section 3. In section 3, Courts is defined as follows :-

“Court” – “Court” includes all Judges and Magistrates, and all persons, except arbitrators, legally authorized to take evidence.”

(b)
Principal Commissioner of Income-Tax Vs Roshan Lal Sancheti [2023] 150
taxmann.com 227 (Rajasthan) – In this case the statement recorded during the course of search u/s 132(4) of the IT Act, 1961, the Hon’ble High Court held that when a statement is recorded at two stages and the assessee had categorically admitted in clear terms additional income, could not be discarded simply in satiric manner where in appellant’s case, no second statement was recorded and in the statement recorded u/s 132(4), the appellant has submitted that presently he is unable to got verify from the books of accounts. Thus, the ratio decided in the said judgment are inapplicable in the appellant’s case.

(c)
Bannalal Jat Constructions (P) Ltd. Vs ACIT [2019] 106 taxmann.com 128 (SC) –
The facts of this case were that during the course of search cash was found at the residential premises of Shri Banna Lal Jat one of the Directors of above referred Pvt. Ltd.
company. In the statement recorded u/s 132(4) of the IT Act, 1961, Shri Banna Lal Jat disclosed the said cash found as undisclosed income of the Private Limited company and he further reconfirmed in the statement recorded in the second statement recorded u/s 131
of the IT Act, 1961. Thereafter, Shri Banna Lal Jat informed that the said cash belongs to his proprietorship concern. In applicant’s case as evident from the assessment order that his facts are all together different and as such the ratio decided in the said case relied upon by the learned CIT(A) are inapplicable.

(d)
CIT, Bikaner Vs Ravi Mathur in D.B. Income Tax Appeal No. 67/2002, Hon’ble
Rajasthan High Court – In this case, the Hon’ble court held that burden lies on the assessee to establish that admission made in the statements are incorrect to which, Shri
Ravi Mathur failed to do so. In appellant’s case, the cash found during the course of search was verifiable from the books of accounts and also from his categorically

11
Sh. Mahendra Singh Ratnawat, Jaipur.

submissions that the cash found at residence was out of his River Sand (Bajri) business and brought at home to deposit in bank account.
1(vii) The facts of the other cases are also different from the appellant’s case and accordingly distinguishable from the facts of the appellant. The submissions are evident and verifiable from the facts mentioned by the learned CIT(A) in his impugned assessment order itself.

In view of the above facts and circumstances of the case, the cash found during the course of search is completely verifiable from the audited books of accounts regularly maintained and accepted by the learned AO. It is humbly prayed to your honour that the impound addition may kindly be deleted.

2(ii) Details of interest paid / debited to the P&L account are as follows :-

A.
Interest paid to bank on Secured loans

Rs.1,11,04,444/-
B.
Interest paid on unsecured loans
Rs.6,52,21,537/-

Less : Interest received on loans & Adv.

Rs.
4,55,13,378/-

Less : Interest transfer to capital
(not claimed in P & L)
Rs.
1,08,00,000/-
Rs. 89,08,159/-

Total interest debited to Profit & Loss A/c
(A+B)

-------------------
Rs.2,00,12,603/-
-------------------
2(iii) It is verifiable from the above details of interest that a sum of Rs. 1,11,04,444/- have been paid to the bank / financial institutions on account of secured business loans borrowed by the appellant. It is also verifiable from the copy of balance sheet that in the immediately preceding year, the secured loans were of Rs. 6,62,99,190/- as against in the year under appeal Rs. 3,00,88,217/-. Thus, the secured loans have been reduced by Rs.
3,62,10,973/-. Further, as also evident from the schedule of loans forming part of balance sheet that the said loans are secured against the Motor Car and immovable properties.
Further, it is also verifiable from the balance sheet that the Capital A/c credit balance of the appellant was Rs. 12,91,56,302/- accordingly, the appellant has not withdrawn / used the loans and advances for none business and / or personal use. It is also a fact that bank

12
Sh. Mahendra Singh Ratnawat, Jaipur.

advances, loans to loanee (Appellant) for business purposes and interest paid to the bank amounting to Rs. 1,11,04,444/- was for business purposes. The total interest paid to the parties was Rs. 6,52,21,537/- and the interest received by the appellant was Rs.
4,55,13,378/-. Further, the appellant suo-moto disallowed a sum of Rs. 1,08,00,000/- out of the total interest expenditure on account of non interest bearing funds advanced to sister concerns, etc. Thus, the net amount of interest debited to the P&L A/c on account of secured loan from market parties was Rs. 89,08,159/-. In this connection, the appellant further submits that there was a credit balanced of Capital A/c of Rs. 12,91,56,302/- being non interest bearing funds and on the said amount if interest is calculated @ 15%
being a rate estimated by the learned AO, the amount of interest works out to Rs.
1,93,73,445/-. Thus, the interest amount on credit balance of capital account is more than amount Rs. 89,08,159/- being the interest paid to private parties debited to the P&L A/c and short by Rs. 6,26,554/- in comparison to the total interest amount of Rs.
2,00,12,603/-. Thus, the appellant does not accept but in the worst scenario only Rs.
6,26,554/- can be disallowed out of the total interest expenses debited to the P&L A/c.
Further, the learned CIT(A) in para No………..of the Appellate Order has not accepted, the copy of balance sheet and details of parties interest paid and received for the reason that the same have been submitted after hearing of the case. In this regard, it is submitted that balance sheet was already on the assessment record and a copy of Interest Ledger
A/c was duly filed with the learned AO during the course of assessment proceedings.
Thus, there was no additional evidence and accordingly, the act of the learned CIT(A) is not in accordance with to the principles of natural justice.

2(iv)
Added to above, it is submitted that party wise details of interest paid and received were filed before the lower authorities and it is verifiable from the said details that interest debited to the P & L account was Rs. 2,00,12,603/-. Out of the said amount, the appellant suo moto transferred a sum of Rs. 1,08,00,000 to his capital account i.e. no claim of this amount has been made in P & L A/c as an expenditure. But, the said amount was debited directly to his Capital A/c. In this connection, it is further submitted that the interest bearing unsecured loans were borrowed from private parties at the prevailing interest rate in the market at the relevant period of time. It is also a known fact that market rate always remains higher than the secured loans from the financial institutions and the said rate also varies as per demand and supply of money circulation in the market. Further, the assessee advanced long term loans to sister concern / firm for business purposes and on the said loans, the appellant received interest at pre-fixed rate(s). In this connection, it is further submitted that now as per settled legal position, no interest expenditure can be disallowed on the loans and advances made to sister concern /
firm and private limited company even no interest bearing and / or at lower rate of interest, then the amount borrowed at higher rate of interest by an assessee. Refer –
Hon’ble Supreme Court SLP No. 2783/2020, Hon’ble Delhi High Court 259 taxman 100,
(2024) 205 ITD 421 (Mumbai). Thus, the estimation of interest @ 15% p.a. by the learned AO on some specified investment is grossly wrong, out of juri iction and without any basis. The appellant also relies upon the judgment of Hon’ble Coordinate
ITAT Bench, Jaipur in case of Nikhil Garg Vs ITO (2022)145 taxman.com 171. Added to above, at the cost of repetition, it is submitted that there was a non interest bearing credit balance of capital a/c of the appellant amounting to Rs. 12,91,56,302/-. In this regard, the appellant also places on record that in the previous year relevant to the assessment year under appeal, the appellant repaid secured loans about Rs. 3.62 crores as per pre fixed repayment due dates of the said loans and to honour, the said commitment, the appellant borrowed the loans from market at the prevailing interest rates.

In view of the above facts and circumstances of the case, it is prayed to your honour at the impugned disallowance of Rs. 1,27,33,677/- may very kindly be deleted.

Additional Ground of Appeal

This ground of appeal is challenging, the higher rate @ 60% of tax by invoking the provision of Section 115BBE of the IT Act, 1961. In this connection, it is submitted that as evident and verifiable from the assessment order itself, that the cash found during the course of search is a business receipts and as per the books of accounts. Thus, the provision of section 69A is inapplicable in appellant’s case. Accordingly, the invoking of provision of section 115BBE of the IT Act, 1961 is wrong and bad in law. Further, as evident from the para 6.2, bottom that the provisions of section 115BBE have been invoked without issuing a show cause notice to the appellant. As now, it is settled law on the issue that the section 115BBE is charging tax at the higher rate and it cannot be applied directly without giving any show cause notice when the issues are disputed that whether the higher rate of tax applicable or not on the alleged income or the nature of income falls u/s 68/69 and 115BBE. Hence, it was mandatory on the part of the ld. AO to issue show cause notice before invoking the provisions u/s115BBE, in absence of the same the rate cannot be charged more than to normal rate of tax, if the addition if any sustained. As evident from the assessment order that the learned AO has failed to do so, which is against the principals of natural justice and against the law refer -Sanghi upon the judgment of Hon’ble Coordinate Jodhpur ITAT Bench, Jodhpur ITA No.
50/Jodh/2021 consisting Hon’ble Vice President Shri N.K. Saini and Hon’ble Judicial
Member Shri Sandeep Gosain. The Hon’ble Bench held that “ the AO has not issued any show cause notice before invoking the provision of Sec. 115BBE for taxing the income on higher rate. It was mandatory on the part of the AO to issue the specific show cause notice to this effect asking to the assessee as to why the income should not be taxed under sec. 115BBE before doing so. It is very settled legal position that a person (assessee) is entitled to opportunity to show cause as to why not the income of the assessee is determined and charged or taxed in the manner as proposed by the A.O but in the instant case no such type of opportunity had been provided but the AO has failed to do so, which is against the principal of natural justice and against the law. This sect. 115BBE is charging of tax at the higher rate and it cannot be applied directly without giving any show cause notice when the issue are disputed that whether the higher rate of tax applicable or not on the alleged income or the nature of income falls u/s 68/69 and 115BBE. Hence, it was mandatory on the part of the AO to issue show cause before invoking the provisions u/s 115BBE, in absence of the same the rate cannot be charged more than to normal rate of tax, if the addition if any sustained”.
In view of the above facts and submissions duly supported by series of decisions of Hon’ble High Courts and ITAT Benches, the invoking the provision of section 115BBE to charge the tax on the additions made to the declared total income of the appellant, is legally inapplicable wrong and bad in law, deserves to be cancelled / set aside.”

15
Sh. Mahendra Singh Ratnawat, Jaipur.

proceedings the assessee has explained that during the year under consideration, the assessee being an Authorized Agent / Contractor of Rajasthan State
Government Mining Department collected this amount as Sale proceeds of River
Sand (Bajri)which was kept in his residence to be deposited in his bank account.
The appellant also submitted that out of the total cash found, a sum of Rs.
42,35,000/- were found in the bed room of his younger brother, who is a bank employee and the same was given by the appellant to deposit in his bank account.
During the assessment proceedings, in reply to questions put to assessee particularly Q. Nos. 23 & 24, the assessee admitted that the amount found from his residence was the sale proceeds of Bajri but he was not in a position to verify the same as the books of account relating to this account could not be prepared at that point of time. Thus on the basis of answers to Q. Nos. 23 & 24, the AO made the addition treating it as undisclosed income. To arrive at the correct facts and situation, the ld. AR of the assessee submitted that it is worth explaining the nature of appellant’s business. As submitted earlier, the assessee was an authorized agent/contractor of Mining Department, Rajasthan State Government to collect royalty on the River Sand Mining (Bajri) for and on behalf of the State
Government. The method and procedure of collection of the said royalty (also available on Mining Department Portal) was that the Mining Department issues serially numbered and signed stamp receipt books for collection of royalty to the 16
Sh. Mahendra Singh Ratnawat, Jaipur.

contractor appellant on monthly basis. The appellant for collection of the royalty, established royalty collection check posts, naka / points in the allotted leased area through which the vehicles transporting the River Sand (Bajri). For collection /
royalty amount serially numbered cash receipts from the receipt book(s) issued by the Mining Department is / are being issued in original copy to the transporting vehicle driver and carbon copy thereof has been kept / retained as office copy. As submitted supra that the receipt book(s) for royalty collection are issued by Mining
Department on monthly basis and by the end of 7th working day of next month, a statement / return has to be submitted to Mining Department having the particulars of date wise collection of royalty amount and receipt number(s) along with copy of the used receipt books. The appellant besides a contractor for royalty collection was also a Government Authorized Dealer to sale the River Sand (Bajri). Thus, as per above method / nature of business, entire receipts were collected at the royalty collection check post-points and more than 90% expenditures have also been incurred at the said business places i.e. royalty collection check posts / points.
Accordingly, main accounting and primary records have been maintained at various royalty collection check posts. At the time of search, the said record was lying at work site(s), further the business administrative cum head office is situated at Jaipur and then final accounting work is done on computer / e-accounting on the basis of particulars / details of receipts and expenditures forwarded periodically to 17
Sh. Mahendra Singh Ratnawat, Jaipur.

head office by various royalty collection check posts. In view of the above accounting system and modus-operandi of business, no physical books of accounts were available at residence of the appellant. Thus it was not possible for the assessee to verify the books of account at that point of time when the search proceedings took place. The computer(s) in which accounting has been done were maintained installed at Head Office and hard disc(s) having accounting data file(s) were seized by the IT Department. The said hard disc(s) is / are still lying seized with the AO. As per above facts and system of accounting, by no stretch of imagination, it can be said that the copy of cash book entries and reconciliation statement of cash found, filed with the DDIT (INV-2) and also with the learned
AO was an afterthought of the appellant.
During the course of assessment proceedings, the assessee reiterated his earlier submission and explained that the cash found during the course of search are recorded in regular books of accounts. For verification of the facts, he submitted copy of cash book from 1stJuly to till date of search i.e. 2nd August,
2017. It was further submitted by the appellant that the opening cash in hand as on the date of search was much more than the cash found during the course of search.
Further, the said cash in hand position was worked out / prepared on the basis of seized books of accounts lying with the Assessing Officer. A copy of said cash in hand statement and copy of cash book entries for 15 days prior to the date of 18
Sh. Mahendra Singh Ratnawat, Jaipur.

search were also filed with the learned CIT(A). Copies of the said documents are submitted PBP 31-41.The ld. AR further submitted that the AO has not pointed out any mistake in the said cash in hand statement prepared from the seized record and filed during the course of assessment proceedings.
The ld. AR further submitted that in the statement recorded under section 132(4) the assessee only stated that at that particular point of time he was unable to verify the said cash found from the books of accounts and the accepted the cash found as an income and agreed to pay the income tax on the said amount in the financial year 2017-18 was because of mental pressure mounted by search team on the assessee. Therefore, to buy peace of mind he accepted and surrendered Rs.
51,77,600/-.As of now, it is a settled position of law that the admission by the assessee is an extremely important piece of evidence but it cannot be a conclusive and the assessee may later show that the admission mode was incorrect. Reliance is placed on the judgment of Hon’ble Supreme Court in the case of Pullangode
Rubber Produce Company Ltd. Vs State of Kerala & Another, (1973) 91 ITR
0018 (SC) wherein the Hon’ble Supreme Court held that the admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made admission to show that it is incorrect and the assessee should be given proper opportunity to show the correct state of affairs.

19
Sh. Mahendra Singh Ratnawat, Jaipur.

The ld. AR explained that the cash found during the course of search are recorded in regular books of accounts and for verification of the same, the assessee submitted copy of cash book from 1st July to till date of search i.e. 2nd August,
2017. It was further submitted by the appellant that the opening cash in hand as on the date of search was much more than the cash found during the course of search.
Further, the said cash in hand position was worked out / prepared on the basis of seized books of accounts lying with the learned Assessing Officer. In support of his version, copy of said cash in hand statement and copy of cash book entries for 15 days prior to the date of search were also filed with the learned CIT(A). We find that in support of his case, the assessee has furnished before the Bench the following list of documentary evidences :
S.NO.

PARTICULARS OF DOCUMENTS
PAGE NO.
1. Copy of manuscript bayan (statements)
1-11
2. Copy of typed bayan (statements)
12-20
3. Copy of Balance Sheet A.Y. 2018-19
21
4. Copy of P & L A/c for the year ended 31st March, 2018
22
5. Copy of details of fixed assets and depreciation for the period ended 31st March, 2018
23
6. Details of secured Loans as on 31.03.2015
24
7. Copy of details of Proprietor’s Capital A/c for the period ended 31-03-2018
25
8. Copy of details of unsecured Loans, Sundry Creditors,
A.Y. 2018-19
26-28
9. Copy of details of monthly statement to be submitted by Contractor to mining department.
29-30
10. Copy of cash book from 1st July 2017 to 2nd August 2017. 31-41

20
Sh. Mahendra Singh Ratnawat, Jaipur.

The ld. AR has further placed reliance on the following case laws :
(m)
Taxmann.com 49 (Madras) - The Hon’ble High Court held that wherein retraction made during the course of assessment proceedings was entertained and relief was granted on merits of the explanation.
(n)
CIT Vs Sunil Aggarwal [2015] 64 taxmann.com 107 (Delhi)- the Hon’ble Court held that whether since assessee did not simply retract statement made during search and he also offered an explanation for amount of Rs. 86 lakhs and this was verifiable from books of account, impugned addition of Rs. 86 lakhs was not justified – Held, yes
(o)
192(SC) – The Hon’ble Court held that if, two views are possible, the view in favour of the assessee should be preferred.
(p)
CIT Vs K.Y. Pilliah& Sons, (1967) 63 ITR 411 (SC)
(q)
ACIT, Central Circle, Ajmer Vs. Shri Devendra Kumar Choudhary 2-S-10 to 2-S-
18, Basant Vihar, Bhilwara, ITA No. 828/JP/16
(s)
CIT, Central –II, Mumbai Vs Omprakash K. Jain (2009) 178 Taxman 179
(Bombay)
(v)
Mehta Parikh & Co. Vs CIT (1956) 30 ITR 181 (SC)
(w)
The case laws relied upon by the learned CIT(A) are distinguishable on the facts of the appellant’s case. The case wise facts are discussed as under :-
(a)
Commissioner of Income-tax v. Hotel Meriya [2010] 195 Taxman 459 (Kerala) /
[2011] 332 ITR 537 (Kerala) [26.05.2010] – Commissioner of Income-tax v.
Hotel Meriya [2010] 195 Taxman 459 (Kerala) / [2011] 332 ITR 537 (Kerala)
[26.05.2010] – “What is evidence? We shall examine it first. Evidence is defined in section 3 of the Evidence Act as follows :
“Evidence” :- “Evidence” means and includes – (1) all statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry, such statements are called oral evidence.”
(2) all documents including electronic records produced for the inspection of the Court, such documents are called documentary evidence.”
The ‘Court’ mentioned above in the definition of evidence would include all persons, except arbitrators, legally authorized to take evidence as defined under section 3. In section 3, Courts is defined as follows :-
“Court” – “Court” includes all Judges and Magistrates, and all persons, except arbitrators, legally authorized to take evidence.”

(b)
Principal Commissioner of Income-Tax Vs Roshan Lal Sancheti [2023] 150
taxmann.com 227 (Rajasthan) – In this case the statement recorded during the course of search u/s 132(4) of the IT Act, 1961, the Hon’ble High Court held that when a statement is recorded at two stages and the assessee had categorically admitted in clear terms additional income, could not be discarded simply in satiric manner.

Whereas in appellant’s case, no second statement was recorded and in the statement recorded u/s 132(4), the appellant has submitted that presently he is unable to got verify from the books of accounts. Thus, the ratio decided in the said judgment are inapplicable in the appellant’s case.

(c)
Bannalal Jat Constructions (P) Ltd. Vs ACIT [2019] 106 taxmann.com 128
(SC) – The facts of this case were that during the course of search cash was found at the residential premises of Shri Banna Lal Jat one of the Directors of above referred Pvt. Ltd. company. In the statement recorded u/s 132(4) of the IT Act,
1961, Shri Banna Lal Jat disclosed the said cash found as undisclosed income of the Private Limited company and he further reconfirmed in the statement recorded

22
Sh. Mahendra Singh Ratnawat, Jaipur.

in the second statement recorded u/s 131 of the IT Act, 1961. Thereafter, Shri
Banna Lal Jat informed that the said cash belongs to his proprietorship concern.

In applicant’s case as evident from the assessment order that his facts are all together different and as such the ratio decided in the said case relied upon by the learned CIT(A) are inapplicable.

(d)
CIT, Bikaner Vs Ravi Mathur in D.B. Income Tax Appeal No. 67/2002,
Hon’ble Rajasthan High Court – In this case, the Hon’ble court held that burden lies on the assessee to establish that admission made in the statements are incorrect to which, Shri Ravi Mathur failed to do so.

In appellant’s case, the cash found during the course of search was verifiable from the books of accounts and also from his categorically submissions that the cash found at residence was out of his River Sand (Bajri) business and brought at home to deposit in bank account.

We, therefore, keeping in view the above facts and circumstances of the case, and respectfully following the judicial precedents discussed herein above of the Hon’ble Supreme Court, various High Courts and the Tribunal, and the documentary evidences furnished before us, are of the view that the assessee has discharged his onus to prove that the cash found during the course of search is completely verifiable from the audited books of accounts regularly maintained and the AO has not pointed out any defect/mistake therein. Accordingly, we delete the addition. Ground no. 1 of the assessee is allowed.
The Second Ground relates to addition of Rs. 1,27,33,677/- made by the AO on account of disallowance of interest expenditure out of total interest expenses debited to Profit & Loss account of Rs. 2,00,12,603/-.

23
Sh. Mahendra Singh Ratnawat, Jaipur.

Having considered the rival contentions and carefully perused the material placed on record. From perusal of the record, we observe that the assessee claimed interest paid on secured/unsecured business loans amounting to Rs. 2,00,12,603/- and debited the same to Profit & Loss account. The AO made the addition for the reason that there is no nexus between the claimed interest expenditure with its business expediency. As per the Profit & Loss account placed on the case file, the details of interest paid/debited to the P&L account are as under :-
Interest paid to bank on Secured loans

Rs.1,11,04,444/-
Interest paid on unsecured loans
Rs.6,52,21,537/-

Less : Interest received on loans & Adv.

Rs.4,55,13,378/-

Less : Interest transfer to capital
(not claimed in P & L)
Rs.1,08,00,000/-
Rs. 89,08,159/-

Total interest debited to Profit & Loss A/c (A+B)

-------------------
Rs.2,00,12,603/-
-------------------
In this regard, the ld. AR of the assessee submitted that interest of Rs.
1,11,04,444/- paid to the bank/financial institutions on account of secured business loans borrowed by the assessee are verifiable from the Profit & Loss account. It is also verifiable from the copy of balance sheet that in the immediately preceding year, the secured loans were of Rs. 6,62,99,190/- as against in the year under appeal Rs. 3,00,88,217/-. Thus, the secured loans have been reduced by Rs.
3,62,10,973/-. Further, as also evident from the schedule of loans forming part of 24
Sh. Mahendra Singh Ratnawat, Jaipur.

balance sheet that the said loans are secured against the Motor Car and immovable properties. Further, it is also verifiable from the balance sheet that the Capital A/c credit balance of the appellant was Rs. 12,91,56,302/- accordingly, the appellant has not withdrawn / used the loans and advances for none business and / or personal use. It is also a fact that bank advances, loans to assessee were for business purposes and interest paid to the bank amounting to Rs. 1,11,04,444/- was for business purposes. The total interest paid to the parties was Rs. 6,52,21,537/- and the interest received by the appellant was Rs. 4,55,13,378/-. Further, the appellant suo-moto disallowed a sum of Rs. 1,08,00,000/- out of the total interest expenditure on account of none interest bearing funds advanced to sister concerns, etc. Thus, the net amount of interest debited to the P&L A/c on account of secured loan from market parties was Rs. 89,08,159/-. In this connection, the ld. A/R further submitted that there was a credit balanced of Capital A/c of Rs.
12,91,56,302/- being non interest bearing funds and on the said amount if interest is calculated @ 15% as estimated by the AO, the amount of interest works out to Rs. 1,93,73,445/-. Thus, the interest amount on credit balance of capital account is more than amount Rs. 89,08,159/- being the interest paid to private parties, debited to the P&L A/c and short by Rs. 6,26,554/- in comparison to the total interest amount of Rs. 2,00,12,603/-. Thus, the appellant does not accept but in the worst scenario only Rs. 6,26,554/- can be disallowed out of the total interest expenses

25
Sh. Mahendra Singh Ratnawat, Jaipur.

debited to the P&L A/c. Further, the learned CIT(A) at page 31in last para of the Appellate Order has not accepted the copy of balance sheet and details of parties interest paid and received for the reason that the same have been submitted after hearing of the case. On the contrary, the ld. A/R submitted that balance sheet was already on the assessment record and a copy of Interest Ledger A/c was duly filed with the AO during the course of assessment proceedings. Thus, there was no additional evidence and accordingly, the act of the learned CIT(A) is not in accordance with to the principles of natural justice.
The ld. AR further submitted that party-wise details of interest paid and received were filed before the lower authorities and it is verifiable from the said details that interest debited to the P & L account was Rs. 2,00,12,603/-. It is observed that the appellant suo moto transferred a sum of Rs. 1,08,00,000/-out of total interest expenditure to his capital account and not claimed in P & L A/c as an expenditure. The said amount was debited directly to his Capital A/c. In this connection, it is further submitted that the interest bearing unsecured loans were borrowed from private parties at the prevailing interest rate in the market at the relevant period of time. Further, the assessee advanced long term loans to sister concern / firm for business purposes and on the said loans, the appellant received interest at pre-fixed rate(s). In this regard, the ld. A/R submitted that now as per settled legal position, no interest expenditure can be disallowed on the loans and 26
Sh. Mahendra Singh Ratnawat, Jaipur.

advances made to sister concern / firm and private limited company, even no interest bearing and / or at lower rate of interest, then the amount borrowed at higher rate of interest by an assessee. Reliance is placed on the judgments in the case of Pr. CIT Vs Elesh Instruments and Holding Co. (P) Ltd. (Bombay HC)
SLP dismissed by Hon’ble Supreme Court SLP No. 2783/2020, Hon’ble Delhi
High Court 259 taxman 100, (2024) 205 ITD 421 (Mumbai). Thus, the estimation of interest @ 15% p.a. by the learned AO on some specified investment is grossly wrong, out of juri iction and without any basis. Reliance is placed on the decision of Co-ordinate Bench of the Tribunal, Jaipur in case of Nikhil Garg Vs ITO
(2022)145 taxman.com 171. The ld. A/R submitted that there was a non interest bearing credit balance in capital a/c of the appellant amounting to Rs.
12,91,56,302/-. In this regard, the appellant also places on record that in the previous year relevant to the assessment year under appeal, the appellant repaid secured loans about Rs. 3.62 crores as per pre fixed repayment due dates of the said loans and to honour, the said commitment, the appellant borrowed the loans from market at the prevailing interest rates.
From all the above we find that the appellant on its own had disallowed a sum of Rs. 1,80,00,000/- considering the same to be incurred for non business purposes. The ld. AO and CIT (A) have not found any deformity in such claim of 27
Sh. Mahendra Singh Ratnawat, Jaipur.

the appellant. Hence the disallowance of interest of Rs. 1,27,33,677/- is not sustainable and we delete the same.
As the ground no. 3 is in consequence to ground no. 1 wherein addition of Rs. 51,77,600/- has been made u/s 69A of the Income Tax Act, 1961 and the ld.
AO has charged higher tax rate of 60% on such addition and since we have allowed ground no. 1 in favour of the appellant by deleting the same and hence the same becomes infructuous and hence is not required to be adjudicated upon,.
Hence this ground no. 3 of the appellant is dismissed.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open court on 15/09/2025. ¼ xxu xks;y ½

¼MkWa-,l-lhrky{eh½
(Gagan Goyal)

(Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur fnukad@Dated:- 15/09/2025
*Santosh
आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
1. The Appellant- Sh. Mahendra Singh Ratnawat, Jaipur.

सहायक पंजीकार@Aेेजज. त्महपेजतंत