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Facts
During a search operation, incriminating materials were found belonging to the assessee, leading to a notice under Section 153C of the Income-tax Act. The Assessing Officer (AO) made an addition of Rs. 5 lakhs based on a diary entry suggesting a cash receipt not offered to tax, which was upheld by the CIT(A).
Held
The Tribunal found that the diary entry mentioning Rs. 5 lakhs with alphabet 'C' indicated a cheque transaction, not cash. The assessee provided bank statements showing no such receipt and explained the entry related to a different entity named 'Automation'.
Key Issues
Whether the addition made on account of alleged cash receipt of Rs. 5 lakhs as unexplained business income is justified.
Sections Cited
153C, 143(3), 142(1), 28
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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI M. BALAGANESH
O R D E R
PER M. BALAGANESH, AM & 2699/Del/2025 for 2018-19 and 2019-20, arises out of the order of the ld. Commissioner of Income Tax (Appeals)-30, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 28.02.2025 against the order of assessment passed u/s 153C r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 27.03.2023 by the Assessing Officer, DCIT, Central Circle-32, New Delhi (hereinafter referred to as ‘ld. AO’). Identical issues are involved in both these appeals hence, they are taken up together the disposed of by this common order for the sake of convenience.
With the consent of both the parties, the facts relevant for AY 2018-19 are taken up for adjudication and the decision rendered therein shall apply with equal force for AY 2019-20 except with variance in figures.
The only issues to be decided in both the appeals is as to whether the ld CIT(A) was justified in confirming the addition made on account of profit @35% of the sales in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the materials available on record. The assessee is carrying proprietorship business under the name and style of M/s. Room Tone at Gurgaon. A search and seizure operation was carried at the various premises of Kuldeep Bishnoi Group and its associates on 23.07.2019 wherein, various documents/ books of account etc were found and seized and statements of various persons were recorded. In the said search, certain incriminating materials were found and seized which belonged to assessee herein. Accordingly, after recording satisfaction in terms of Section 153C of the Act, notice u/s 153C of the Act was issued to the assessee on 29.03.2022. In compliance to the said notice, the assessee filed its return of income on 08.04.2022 declaring total income of Rs. 18,39,080/-. The ld AO vide notice issued u/s 142(1) of the Act dated 17.03.2023 show caused the assessee to explain the data found from the digital data from Shri Sukumar Poria wherein an amount of Rs. 11.25 lakhs was mentioned with the name of “Samir” and the the contention of the assessee that he had received only Rs. 3,26,270/- and Rs. 2,39,230/- amounting to Rs. 5,65,500/-, is not acceptable. Accordingly, two show cause notices were issued for Rs. 5 lakhs for AY 2018-19 and Rs. 1,00,090/- for AY 2019-20 to the assessee to treat the same as unexplained income. It was clarified that a diary was found in the possession of Shri Sukumar Poria (personal assistant of Kuldeep Bishnoi) during the course of search Page | 2 operation carried out on 23.07.2019. This diary contained various transaction details and party details related to construction work being carried out at 135, Gold Links, New Delhi being the property owned by M/s. Seth Enterprises Pvt. Ltd at page 87 of said diary which is reproduced in page 3 of the assessment order. The ld AO noted that the assessee had received payment of Rs. 5,00,000/- on 16.07.2017, Rs. 3,26,270/- on 19.03.2018 and Rs. 3,39,320/- on 07.07.2018 totaling to Rs. 11,65,590/- . The ld AO linked this page with page 114 of the same diary wherein running (day wise) ledger was maintained. The said page is reproduced in page 4 of the assessment order. On perusal of the said page, the ld AO noted that payment of Rs. 5 lakh in the name of “Automation” appeared on 16.07.2017 and the same was accompanied with alphabet (D) which mean payment of Rs. 5 lakhs made in cash. The ld AO noted that Shri Sukumar Poria in his statement had denoted the alphabet (C) to denote cheque transactions and the alphabet (D) to denote cash transactions. The similarity in amount, date and name clearly suggests that this entry is same as appearing in party ledger “Samir Automation”. The assessee always pleaded that he had received only 2 payments of Rs. 3,26,270/- for AY 2018-19 and Rs. 2,39,230/- for AY 2019-20 and payment of Rs. 5 lakhs was not received by him. The ld AO noted two digital data of Shri Sukumar Poria, amount of Rs. 11.65 lakhs was appearing in front of name “Samir” which amount exactly matches with the total amount of 3 transactions mentioned at page 87 of the diary Rs 1165590/- i.e. (500000 +326270+339320). It was specifically submitted before the ld AO that assessee is neither carrying business in the name of “Samir Automation” nor as “Auto Menon” as found mentioned respectively at page 87 and 114 diary. But at Sl. No. 4 of page 121 of the diary, the name of “Samir Automation” mentioned a contact number as 9811202295 which on verification with Truecaller application was found to be belonging to Samir Kripalani, the Page | 3 assessee herein. Based on these evidences, the ld AO concluded that assessee was indeed in receipt of cash of Rs. 5 lakhs towards business receipts which was not offered to tax. The ld AO noticed that the assessee had declared 29.61% of gross profit for AY 2020-21 i.e. the year of search. On the alleged business receipt in cash to the extent of Rs. 5 lakhs, the ld AO estimated the gross profit of 35% and made an addition of Rs. 1,75,000/- in the assessment as unexplained business income u/s 28 of the Act. This action of the ld AO was upheld by the ld CIT(A).
At the outset, we find that in page 87 of the diary, a sum of Rs. 5 lakhs was mentioned with the alphabet (C) which as per the statement of Shri Sukumar Poria denotes cheque transactions. The decoding of alphabet (C) to denote cheque and alphabet (D) to denote cash by Shri Sukumar Poria has been accepted by the revenue. Hence, the explanation of the assessee that a cheque for Rs. 5 lakhs dated 16.07.2017 could have been intended to be issued to the assessee but not issued to the assessee by the concerned party, becomes a plausible explanation and deserves to be accepted in view of the fact that assessee furnished the entire bank statements and was able to prove that there was no receipt of cheque transactions for Rs 5 lakhs therein. This sum of Rs. 5 lakhs was never reflected in the bank statement of the assessee. Hence, the other explanation of the assessee that this sum of Rs. 5 lakhs was not mentioned in relation to assessee’s proprietary concern M/s. Room Tone, Gurgaon and is relate to some other concern by name “Automation” as per page 114 of the seized diary is also to be accepted. The assessee had categorically stated before the lower authorities that he was neither carrying on any business in the name of “Samir Automation” nor “Auto Menon”. Hence, it could be safely concluded that a sum of Rs. 5 lakhs is not a cash transaction at all and hence there cannot be any allegation that could be levelled on the assessee that he was in receipt of Rs. 5 lakhs in cash on 16.07.2017 as business receipt and hence, there cannot be any addition that could be made in the hands of the assessee for the sum even on estimation of gross profit thereon. Accordingly, the addition made by the ld AO is hereby directed to be deleted.
As stated in the earlier part of this order, the decision rendered herein shall apply with equal force for AY 2019-20 also except with variance in figures in view of identical facts. The Ground No. 1 is general in nature and hence dismissed.
In the result, both the appeals of the assessee are partly allowed.
Order pronounced in the open court on 17/02/2026.