DEEPAK KAKUBHAI MEHTA,MUMBAI vs. DCIT, CENTRAL CIRCLE 4(1), MUMBAI

The year-wise details of the additions made by the Assessing Officer are tabulated below: AY Reasons of Addition Amount (Rs.) 2012-13 (i) Cash loan to Nilesh Bharani u/s 69 4,85,00,000/- (ii) Notional interest earned thereon u/s 30,01,167/- 56 2013-14 (i) Cash loan to Nilesh Bharani u/s 69 8,10,00,000/- (ii) Notional interest earned thereon u/s 1,38,22,867/- 56 2014-15 (i) Cash loan to Nilesh Bharani u/s 69 2,50,00,000/- (ii) Notional interest earned thereon u/s 1,93,60,917/- 56 2015-16 (i) Notional interest earned thereon u/s 1,96,30,917/- 56 2016-17 (i) Notional interest earned thereon u/s 1,96,30,917/- 56 2017-18 (i) Notional interest earned thereon u/s 1,70,18,783/- 56 2018-19 (i) Notional interest earned thereon u/s 1,61,51,250/- 56 41,99,700/- (ii) Unexplained Jewellery u/s 69A

The assessee has raised multiple grounds of appeal for each of the assessment years. However, the grounds, in substance, revolve around the following principal grievances: to 6511/Mum/2025 Deepak Kakubhai Mehta (i) that the additions have been made in the absence of any incriminating material found during the course of search at the premises of the assessee, and therefore, in respect of completed / unabated assessment years, the assumption of jurisdiction under section 153A itself is invalid; (ii) that the Assessing Officer has relied upon materials and documents found during income-tax searches conducted in the cases of third parties, without there being any common warrant or joint search, and without invoking the provisions of section 153C of the Act; (iii) that the additions are founded almost entirely on statements recorded under section 132(4), which statements were later retracted and are not supported by any incriminating material; (iv) that the approval granted under section 153D of the Act was mechanical and without application of mind; and (v) that the addition under section 69A in respect of jewellery for Assessment Year 2018-19 has been made without properly appreciating the explanation, evidences, and family ownership of the jewellery.

During the course of the search action conducted at the residential premises of the assessee on 18 December 2017 and thereafter till its conclusion on 21 December 2017, statements of the assessee were recorded under section 132(4) of the Act on multiple occasions. It is an admitted position on record, and also borne out from the assessment to 6511/Mum/2025 Deepak Kakubhai Mehta orders themselves, that no books of account, documents, loose papers, cash, or other incriminating material relating to the additions ultimately made were found or seized from the premises of the assessee. 6.1. It is also an undisputed fact that whatever material has been referred to by the Assessing Officer in the assessment orders was already available with the authorised officers at the relevant time, having been procured from independent income-tax searches conducted earlier in the cases of other persons, including Shri Nilesh Bharani / Evergreen Enterprises. In none of the panchnamas drawn in those searches did the name of the assessee figure, nor was there any common warrant or joint search covering the assessee and those third parties.

The Assessing Officer’s primary reliance was on certain statements recorded under section 132(4) during the course of search on the assessee, wherein he was confronted with statements recorded elsewhere and with documents seized from the premises of third parties. These statements, according to the Assessing Officer, constituted incriminating material justifying the additions under section 153A.

It is further an admitted fact on record that the assessee, by way of a detailed communication dated 03 January 2019, addressed to the Investigation Wing, Mumbai, retracted the statements recorded during the course of search. In the said retraction, the assessee categorically stated that the statements were not based on any to 6511/Mum/2025 Deepak Kakubhai Mehta incriminating material found at his premises but were recorded on the basis of statements and materials pertaining to third parties, and that the admissions, if any, were obtained under mental pressure. It has also been stated before us that the said retraction has never been controverted by the Revenue. No cross-examination was carried out, nor was any independent enquiry conducted to disprove the assertions made in the retraction. In law, therefore, the contents of the retraction remain unchallenged. Ld. Counsel for the assessee Mr. Bindal placed reliance on Mehta Parekh & Co. vs. CIT-(1956) 30 ITR 181 (SC) wherein it was held that where an affidavit or retraction remains uncontroverted, the same must be accepted as true.

Shri Vinod Kumar Bindal, submitted that the entire assessment proceedings suffer from a foundational jurisdictional defect. It was contended that no incriminating material whatsoever was found during the course of search at the premises of the assessee which could justify the additions made in the assessment orders. The learned counsel emphasised that the assessment orders themselves do not refer to any seized material found from the assessee. Mr Bindal the Ld. Counsel of the assessee submitted that in the statements recorded u/s 132(4) of the Act on 18/12/2017, the assessee was shown the statements recorded u/s 132(4) elsewhere about the money lent in cash to Nilesh Bharani / Evergreen Enterprises outside the regular books of account. The additions made are only in respect of the alleged cash loans given to Evergreen Enterprises / Nilesh Bharani and to 6511/Mum/2025 Deepak Kakubhai Mehta some jewellery in the AY 2018-19.The Ld. Counsel of the assessee further submitted as was pleaded before the lower authorities also forming part of the paper book submitted that all these questions and answers relevant to the additions made in the hands of the assessee in the respective AYs clearly demonstrate and confirm the contention of the assessee that no such evidence much less incriminating the assessee in any manner was found during the course of search in the premises of the assessee searched u/s 132 of the Act and therefore, by following the judgment of the Apex Court in PCIT vs AbhisarBuildwell (P) Ltd [2023] 149 taxmann.com 399 (SC), no addition at all could be made in any assessment order passed u/s 153A of the Act.

It is significant to note that the assessee did not, at any point during the course of the statement, quantify the alleged cash loans in the manner subsequently worked out by the Assessing Officer. Nor did the assessee admit that the alleged to 6511/Mum/2025 Deepak Kakubhai Mehta cash loans were advanced by him personally, outside the regular books of account, in the quantum ultimately assessed.

A careful reading of the questions and answers demonstrates that even on resumption of the statement, the assessee reiterated that details could be provided only after verification of records. The assessee also clarified that he could recollect the names of two parties against whom recovery suits had been filed and did not wish to say anything further.

Thus, the statements, when read in their entirety and in proper context, do not reflect any clear, categorical, or unambiguous admission of undisclosed income or unexplained investment by the assessee. On the contrary, the statements consistently reflect uncertainty, lack of immediate recollection, and a request for time to verify records. 19.1. Based on the aforesaid statements and on material seized during independent searches conducted in the cases of third parties, the Assessing Officer proceeded to allege that the assessee had advanced substantial cash loans to Shri to 6511/Mum/2025 Deepak Kakubhai Mehta Nilesh Bharani / Evergreen Enterprises over multiple assessment years. 19.2. According to the Assessing Officer, the alleged cash loans were not recorded in the regular books of account of the assessee and represented unexplained investments liable to be brought to tax under section 69 of the Act. The Assessing Officer further alleged that the assessee had earned interest on such cash loans, which was also not disclosed and was liable to be assessed as income under section 56 of the Act. 19.3. In support of the above allegations, the Assessing Officer relied upon certain loose papers, cash ledgers, and notings seized from the premises of Shri Nilesh Bharani during the course of a search conducted earlier in October 2017. These documents, according to the Assessing Officer, reflected cash transactions allegedly involving the assessee.

It is an admitted and undisputed fact that none of these documents were found or seized from the premises of the assessee during the search conducted on him. The assessment orders do not record discovery of any document, paper, or asset from the assessee evidencing the alleged cash loans. Despite this, the Assessing Officer treated the entries appearing in the documents seized from the premises of Shri Nilesh Bharani as reflecting cash loans advanced by the assessee and proceeded to quantify such alleged loans assessment year-wise. to 6511/Mum/2025 Deepak Kakubhai Mehta 21. The Assessing Officer prepared detailed working charts in the assessment orders, setting out the alleged opening balances, cash loans advanced during the year, repayments received, and closing balances, as well as the notional interest computed thereon. 21.1. The working of the alleged cash loans, as reproduced by the Assessing Officer in paragraph 5.30 of the assessment order for Assessment Year 2012-13, is placed on record and is reproduced hereunder. 5.30. In the light of the above discussion, the cash loans given by the assessee to Shri Nilesh Bharani are assessed as undisclosed investment in loans amounting to Rs. 15,45,00,000/- for the AYs 2012-13 to 2018-19, u/s 69 of the IT Act as detailed below.

The retraction filed by the assessee is part of the record and has been relied upon before the authorities below as well as before us. The contents of the retraction have not been controverted by the Revenue by way of cross-examination or by bringing any independent material on record.

The learned counsel for the assessee submitted that the entire addition rests on a fundamentally flawed premise, namely, that statements recorded under section 132(4), even in the absence of any incriminating material found during the search at the assessee’s premises, can justify additions under section 153A of the Act. 26.1. It was contended that a plain reading of the statements relied upon by the Assessing Officer clearly demonstrates that no incriminating material was unearthed during the search on the assessee. The questions put to the assessee were based on material found elsewhere, and the assessee’s responses were tentative and conditional. to 6511/Mum/2025 Deepak Kakubhai Mehta 27. The learned counsel further submitted that the Assessing Officer has not brought on record any material to establish that the alleged cash loans were actually advanced by the assessee, that the alleged amounts flowed from the assessee to the alleged borrower, or that the assessee had the financial capacity to advance such loans in cash.

It was emphasised that despite the search and survey proceedings continuing over several days, and despite the presence of multiple officers at the premises of the assessee, no incriminating material whatsoever was found. This, according to the learned counsel, itself demonstrates the absence of any undisclosed activity on the part of the assessee.

The learned Departmental Representative supported the orders of the authorities below. It was contended that the statement recorded under section 132(4) constituted incriminating material and that the assessee had admitted the fact of cash lending, at least to some extent. It was further argued that the materials found in the case of Mr. Nilesh Bharani, read together with the assessee’s statement, were sufficient to justify the additions.

We have carefully considered the rival submissions, examined the material placed on record, and perused the assessment orders and appellate orders in the light of the statutory scheme governing assessments pursuant to a search under section 132 of the Act. Before embarking upon an examination of the merits of the additions, we consider it to 6511/Mum/2025 Deepak Kakubhai Mehta necessary to adjudicate the jurisdictional challenge raised by the assessee, as the same goes to the very root of the validity of the impugned assessments.

It is an admitted and undisputed position emerging from the record that, on the date of search conducted on 18 December 2017, the assessments for Assessment Years 2012- 13 to 2017-18 had already been completed and had attained finality. None of these assessments were pending or open before the Assessing Officer on the date of search. These assessment years, therefore, fall squarely within the category of completed or unabated assessments, as judicially understood in the context of section 153A of the Act. 31.1. The legal position governing the scope and extent of the Assessing Officer’s powers under section 153A, particularly in relation to completed assessments, is now well settled and no longer res integra. While section 153A undoubtedly confers jurisdiction upon the Assessing Officer to assess or reassess six assessment years preceding the year of search, such jurisdiction is not absolute, uncanalised, or unguided. In respect of completed assessments, the exercise of power under section 153A is circumscribed by a fundamental jurisdictional condition namely, the existence of incriminating material unearthed during the course of search.

The rationale underlying this limitation is firmly rooted in the principle of finality of proceedings. A completed assessment represents a closed chapter in the assessment cycle and cannot be reopened or disturbed merely because a to 6511/Mum/2025 Deepak Kakubhai Mehta search has taken place, unless the search itself yields tangible material revealing undisclosed income pertaining to such completed year. To hold otherwise would render the concept of finality illusory and would effectively convert section 153A into a de facto review provision, a consequence clearly not intended by the legislature.

The Hon’ble Supreme Court in the case of Abhisar Buildwell (P) Ltd., has now authoritatively settled this position by holding, in clear and unequivocal terms, that in the absence of incriminating material found during the course of search, no addition can be made in respect of completed or unabated assessments while framing an assessment under section 153A of the Act. 33.1. The legal consequence flowing from the aforesaid pronouncement is that the jurisdiction of the Assessing Officer to disturb a completed assessment under section 153A is inextricably linked to the discovery of incriminating material during the search conducted at the premises of the assessee. Absent such material, the jurisdiction itself fails.

The expression “incriminating material” has not been defined in the Act. Its contours, therefore, have been shaped and refined through consistent judicial exposition. Broadly speaking, incriminating material must be material which is discovered as a direct result of the search under section 132, found at the premises of the assessee or under his control, relatable to the assessment year in question, and indicative of undisclosed income or assets not disclosed in the regular to 6511/Mum/2025 Deepak Kakubhai Mehta books of account or returns of income. It is equally well settled that mere suspicion, conjecture, or inference drawn from material found in the case of a third party does not satisfy the test of incriminating material. Nor does a post- search analytical exercise, howsoever elaborate, elevate itself to the status of incriminating material if it is not founded on something tangible unearthed during the search at the assessee’s premises.

When the facts of the present case are examined through the prism of the above legal principles, a glaring deficiency becomes apparent. A careful and close reading of the assessment orders reveals that the Assessing Officer has not identified even a single document, paper, ledger, or asset found during the course of search at the premises of the assessee which evidences the alleged cash loans or the earning of interest thereon. The assessment orders are conspicuously silent on this foundational requirement. Instead, the entire edifice of the additions rests upon loose papers and ledgers seized during the course of a search conducted in the case of another person, namely Shri Nilesh Bharani / Evergreen Enterprises, statements recorded under section 132(4) in the cases of such third parties, and the statement of the assessee recorded during the search, wherein he was confronted with such third-party material. Such material, even if assumed to be incriminating in the hands of the person from whose possession it was found, cannot automatically assume the character of incriminating material in the hands of the assessee. to 6511/Mum/2025 Deepak Kakubhai Mehta 36. The Act draws a clear and deliberate distinction between material found during the search of the assessee and material found during the search of another person. Where the Revenue seeks to rely upon documents, books, or assets seized in the case of a third party for making additions in the hands of the assessee, the statute provides a specific and exclusive mechanism under section 153C of the Act. 36.1. Section 153C mandates, as a condition precedent, the recording of satisfaction that the seized material belongs to or pertains to the assessee, followed by the lawful transmission of such material to the Assessing Officer having jurisdiction over the assessee. Only upon fulfilment of these statutory preconditions can proceedings be validly initiated against the assessee on the basis of such third-party material.

In the present case, it is an admitted position that no proceedings under section 153C were initiated, notwithstanding the fact that the material relied upon by the Assessing Officer was found during the search of another person. The Assessing Officer, having consciously chosen not to invoke section 153C, could not have indirectly achieved the same result by stretching the scope of section 153A beyond its permissible limits.

It is a settled principle of law that where the statute prescribes a particular manner for doing a thing, it must be done in that manner alone, or not at all. Any deviation from the statutory mandate vitiates the action at its very inception. to 6511/Mum/2025 Deepak Kakubhai Mehta 39. Considerable reliance has been placed by the Revenue on the statements recorded under section 132(4) of the Act. It therefore becomes necessary to examine, with some degree of doctrinal clarity, the evidentiary value of such statements in the context of search assessments. 39.1. There can be no quarrel with the proposition that a statement recorded under section 132(4) has evidentiary value and may be used in proceedings under the Act. However, it is equally well settled that a statement, by itself and in the absence of corroborative incriminating material, cannot constitute incriminating material for the purposes of section 153A.

Courts have repeatedly cautioned against placing blind or mechanical reliance on statements recorded during search proceedings, particularly when such statements are recorded over extended hours, under circumstances of mental stress, and without reference to contemporaneous documentary evidence. A statement recorded in such circumstances is, at best, a piece of information, which must be tested and corroborated by independent material.

The consistent judicial view, as emerging from decisions of various High Courts, is that a statement recorded under section 132(4) assumes the character of evidence only when it is supported by material found during the search. In the absence of such corroboration, additions founded solely on statements are legally unsustainable. In support of the proposition heavy reliance was placed on the Judgment of the to 6511/Mum/2025 Deepak Kakubhai Mehta Delhi High Court in the case of PCIT vs. Pavitra Realcon Pvt. Ltd. and Others in where the principle was emphatically reiterated.

In the case of Kailashben Manharlal Chokshi v. CIT', the Gujarat High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced hereinbelow: -

Further, the position with respect to whether a statement recorded under Section 132(4) of the Act could be a standalone basis for making assessment was clarified by this Court in the case of CIT v. Harjeev Aggarwal, wherein, it was held that merely because an admission has been made by the assessee during the search operation, the same could not be used to make additions in the absence of any evidence to corroborate the same. The relevant paragraph of the said decision is extracted herein below: "20. In our view, a plain reading of section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to section 132(4) of the Act. However, such statements on a stand alone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation.

In our opinion, the Act does not contemplate computing of undisclosed income solely on the basis of statements made during a search. However, these statements do constitute information, and if they relate to the evidence or material found during the search, they can be used in proceedings under the Act, as specified under Section 132(4) of the Act. Nonetheless, such statements alone, without any other material discovered during the search which would corroborate said statements, do not grant the AO the authority to make an assessment.

Coming to the findings of the ITAT with respect to incriminating material in the case of M/s PavitraRealconPvt. Ltd and M/s Delicate Real Estate Pvt. Ltd, it is seen that the to 6511/Mum/2025 Deepak Kakubhai Mehta ITAT has explicitly held in paragraph no. 18 that no addition has been made on the basis of any incriminating material found during the course of search. Further, the ITAT relied on the decision of the Supreme Court in the case of CIT v. Sinhgad Technical Education Society and held as follows: - "18. Further, while writing the order, it has come to our notice that the Hon'ble Apex Court in the case of Sinhgad Technical Education Society has held that section 153C can be invoked only when incriminating materials assessment year-wise are recorded in satisfaction note which is missing here. Therefore, the proceedings drawn u/s 143(3) as against 153C are invalid for want of any incriminating material found for the 19. In view of the above, the additional grounds raised

The ld. Counsel of the assessee also submitted that during the course of the search itself the assessee informed on 21/12/2017 in his statement as answer to question no. 67 the names of the two parties to whom cash loans were given by his wife Mrs Urvi Deepak Mehta and not by the assessee at all and the fact that the said amounts are duly recorded in the books of account as stated in the answer nos. 41 and 43 to 6511/Mum/2025 Deepak Kakubhai Mehta of his statement u/s 132(4) as extracted herein above. The ld. Counsel also submitted that the assessee categorically stated that copies of the recovery suits filed wee in his office admittedly the office of the assessee was also surveyed u/s 133A simultaneously by the investigation unit and the same document was well with the revenue since then.

In the present case, the statements relied upon by the Assessing Officer do not refer to any document found during the search at the assessee’s premises. On the contrary, the assessee repeatedly stated that he did not recollect details at that stage and that the same would be verified from records maintained at the office. Such responses, when read in their proper context, cannot be elevated to the status of a clear, voluntary, and unequivocal admission of undisclosed income.

More importantly, the assessee retracted the statements at the earliest available opportunity. The retraction has remained uncontroverted. No cross-examination was carried out, nor was any independent enquiry undertaken to disprove the assertions made therein. The Revenue has thus failed to discharge the burden that lay upon it once the retraction was placed on record.

In the backdrop of the aforesaid legal position, and upon a cumulative and holistic consideration of the facts on record, we are of the considered view that no incriminating material was found during the search conducted at the premises of the assessee which could justify the additions made in respect of the completed assessment years. to 6511/Mum/2025 Deepak Kakubhai Mehta 47.1. The additions made by the Assessing Officer are founded entirely on third-party material and uncorroborated statements, which, by no stretch of legal reasoning, can be treated as incriminating material for the purposes of section 153A of the Act. 47.2. Consequently, the assumption of jurisdiction by the Assessing Officer to make additions in respect of Assessment Years 2012-13 to 2017-18 under section 153A is vitiated in law and cannot be sustained.

Having held so, the additions made for these years are liable to be deleted on this jurisdictional ground alone. Nevertheless, since the Assessing Officer and the learned Commissioner (Appeals) have dealt with the merits of the additions at considerable length, and since extensive submissions have been advanced before us on merits as well, we proceed to examine the substantive sustainability of the additions, so as to render a complete and conclusive adjudication and to avoid any remand-driven uncertainty.

Having adjudicated the jurisdictional infirmity attending the impugned assessments for the completed assessment years, we now proceed to examine the substantive sustainability of the additions made on merits, so as to render a complete and conclusive adjudication of the controversy. 49.1. The addition under section 69 of the Act has been made on the allegation that the assessee had advanced to 6511/Mum/2025 Deepak Kakubhai Mehta substantial sums by way of cash loans to Shri Nilesh Bharani / Evergreen Enterprises over multiple assessment years, which loans were not recorded in the regular books of account and represented unexplained investments. The Assessing Officer has proceeded on the premise that the entries appearing in certain loose papers and ledgers seized from the premises of Shri Nilesh Bharani reflected actual cash transactions involving the assessee.

At the outset, it must be noted that section 69 postulates a clear statutory requirement: before an amount can be treated as unexplained investment, the Revenue must establish that the assessee has in fact made such investment and that the assessee has failed to satisfactorily explain the nature and source thereof. The provision does not permit additions to be made on conjectures, surmises, or inferential assumptions divorced from reliable evidence.

In the present case, the primary material relied upon by the Assessing Officer consists of loose sheets, cash ledgers, and notings seized during the course of a search conducted in the case of a third party. It is an admitted position that no such documents were found or seized from the premises of the assessee during the search conducted on him. The assessment orders also do not record the discovery of any corroborative material from the assessee’s possession evidencing the alleged advancement of cash loans. 51.1. The evidentiary value of loose papers and uncorroborated notings is, at best, weak. Courts have to 6511/Mum/2025 Deepak Kakubhai Mehta consistently held that such documents, unless supported by independent and reliable evidence, do not constitute proof of actual transactions. In the present case, the Assessing Officer has not brought on record any independent material to demonstrate that the alleged cash loans were actually advanced by the assessee, that the alleged amounts flowed from the assessee to the alleged borrower, or that the assessee had the financial capacity to advance such loans in cash.

Equally important is the conduct of the alleged borrower. The record reflects that the statements recorded during the search proceedings in the case of Shri Nilesh Bharani were subsequently retracted. The alleged borrower denied the transactions and furnished explanations regarding the entries appearing in the seized documents. Once such retractions are on record, the burden squarely shifts to the Revenue to establish, through cogent and affirmative evidence, that the original statements represented the true state of affairs. That burden has remained undischarged.

Viewed thus, even on merits, the alleged cash loans have not been established by reliable and cogent evidence. The addition made under section 69 of the Act, therefore, does not survive on merits.

The controversy before us is not res integra. Multiple coordinate benches of the Tribunal have had occasion to examine identical factual situations arising from the same set of searches and involving the same alleged borrower. In these cases, the Tribunal has undertaken an exhaustive analysis of the evidentiary record and has consistently held that additions on account of alleged cash loans are unsustainable in law. In these decisions, the Tribunal has noted that despite the magnitude of the alleged cash transactions, not a single piece of incriminating material was found in the possession of the assessee concerned. The improbability of substantial cash transactions leaving no trace at the lender’s end has been emphasised. The absence of corroborative evidence and the to 6511/Mum/2025 Deepak Kakubhai Mehta impermissibility of resting additions solely on statements and third-party documents have been highlighted.

The relevant findings recorded by the coordinate benches, which squarely apply to the facts of the present case, are placed on record and are reproduced hereunder. to 363/Mum/2025 DoD 22/05/2025 13. We have heard the rival submissions and perused the material available on record. The issue pertaining to the existence of incriminating material for the assumption of jurisdiction by the Ld. AO under section 153A of the Act has been duly challenged by the assessee before the Ld. CIT(A) and the Hon‘ble ITAT. The incriminating material relied upon by the revenue was found at the premises of Mr. Nilesh Bharani and M/s Evergreen Enterprises, and the statements of the partners therein were recorded as evidence of undisclosed income. It is an undisputed fact that Mr. Nilesh Bharani is engaged in the business of finance, particularly in cash lending and borrowing, and has earned income in cash. However, based on the statement of the assessee, it is evident that the assessee merely advanced a loan of Rs. 35 lakhs to Mr. Nilesh Bharani through banking channels. The assessee was also subjected to a search under section 132 of the Act on 18/12/2017, but no incriminating documents or material were found at the premises of the assessee. The entire addition in the present case is based solely on presumptions and pertains to third parties involved in the same search proceedings. Factually, the same issue has already been adjudicated in favour of the assessee. We respectfully rely on the decisions of the Coordinate Bench of the ITAT-Mumbai in the cases of RajeshkumarRameshchandra Shah vs. DCIT (supra) and Rupal Kashyap Mehta (supra), and observe that the Hon‘ble Supreme Court's ruling in AbhisarBuildwell (P.) Ltd. is squarely applicable to the facts of the present case.

RajeshkumarRameshchandra Shah - to 5573/M/2024 12. As could be seen from the above extract, in the cross examination taken on oath, on a specific question asked by the assessee, Shri NileshShamji Bharani denied of having entered into any cash loan transaction with the assessee. Thus, the facts on record reveal that except the so called incriminating material seized from the premises of Shri Nilesh Shamji Bharani and some statements recorded u/s. 132(4) of the Act from individuals related to M/s. Evergreen Enterprises, the A.O. had no other corroborative evidence available with him to establish that the assessee had actually advanced any cash loan to Shri Nilesh Shamji Bharani. Moreover, the assessee from the very beginning had emphatically denied of having any cash loan transaction with Shri Nilesh Shamji Bharani. Even, a couple of days after recording of statements u/s. 132(4) of the Act, the concerned persons including Shri Nilesh Shamji Bharani had retracted their statements. In fact, Shri Nilesh Shamji Bharani had filed an Affidavit before the A.O. in course of assessment proceedings completely denying the fact of cash loan transaction and had explained that the entries appearing in the seized document, in reality, represents the cash given to him by his father.

Further, similarly for the AY 2016-17 to 2018-19, the additions were made by the AO by working out the unexplained cash loan given by the assessee to one Mr Nilesh Bharani relying on some information found in a different search and premises of Mr Nilesh Bharani where the name of the assessee was not there in any panchnama by stating that since Mr Nilesh Bharani had admitted in his statement recorded u/s 132(4), receipt of such cash loan from the assessee outside the declared sources in the return of income of the assessee is to be assessed u/s 153A. The said fact was though initially partly admitted by the assessee without actually quantifying the same, yet lateron also retracted by him through an affidavit filed on 09/12/2019 and Mr Nilesh Bharani later also retracted his statement recorded u/s 132(4) vide his letter addressed to the investigation Unit on 14/10/2017. The charts of the additions made are given below: Para 5.33 for alleged cash loan given in the assessment orders 5.33 In the light of the above discussion, the cash loans given by the assessee to Shri Nilesh Bharani are assessed as undisclosed investment in loans amounting to Rs. 29,34,00,000/- for AY 2012-13 to 2018-19, u/s 69 of the IT Act as detailed below.

It is undisputed fact that no material much less incriminating material was found during the course of search from the premises of the assessee in support of the additions, made for the quantum amounts of the alleged cash loans given and the estimated interest thereon in all AYs as per chart herein above is deleted. We direct accordingly to delete the additions as above.

Upon a careful consideration of the facts of the case, the rival submissions, and the material available on record, we find that the core issue arising in the present appeals pertains to the additions made under Section 69 of the Act towards alleged cash loans purportedly advanced by the assessee to one Mr. Nilesh Bharani and his associates, as well as the notional interest computed thereon under Section 56. It is undisputed that these additions are founded solely upon certain loose sheets, coded ledger extracts, and statements recovered and recorded during the course of search proceedings conducted not on the assessee but in the case of a third party, namely, Mr. Nilesh Bharani and entities associated with him.

As rightly contended by the learned counsel for the assessee, Shri Vinod Kumar Bindal, this precise issue, both in law and in fact has been deliberated upon by the Co-ordinate Benches of the Tribunal in several matters involving identical allegations and evidentiary foundations. He specifically drew our attention to the decisions of the Tribunal in the cases of:  Ms. Rupal Kashyap Mehta vs. DCIT in to 6196/Mum/2024 (order dated 27.02.2025), to 6511/Mum/2025 Deepak Kakubhai Mehta  Rajesh Kumar Rameshchandra Shah vs. DCIT in to 5573/Mum/2024 (order dated 31.01.2025), and  Nilesh Bharani vs. DCIT in (order dated 28.02.2023). In each of these matters, the additions made under Sections 69 and 56 were based exclusively on the so-called ―incriminating‖ material seized from the premises of Mr. Nilesh Bharani, which included handwritten ledgers, coded entries, and statements recorded during investigation. The Co-ordinate Benches, after a meticulous examination of the evidentiary trail and the legal framework governing search assessments, unequivocally held that such third-party material howsoever incriminating it may appear cannot be used to make additions in the hands of another assessee under Section 153A, unless the procedural mandate of Section 153C is duly followed.

This Tribunal in Nilesh Bharani (supra), while elaborating the statutory architecture, observed that the jurisdiction under Section 153A is strictly confined to the material unearthed during the course of search conducted on the assessee himself. Where the Revenue seeks to act on the basis of documents found during the search of another person, the only lawful recourse is via Section 153C requiring satisfaction to be recorded that the material belongs to or pertains to the assessee and in the absence of such compliance, the jurisdiction exercised under Section 153A would be rendered invalid and the consequential assessment orders, non-est in law.

The same reasoning was echoed in Rupal Kashyap Mehta (supra), where this Tribunal found that the alleged transactions were neither corroborated by any material found during the search on the assessee nor independently supported by any verifiable documentation, and that even the statement relied upon by the Revenue had been retracted, unauthenticated, or was otherwise uncorroborated. On those grounds alone, the additions were deleted.

In light of the binding ratio laid down by the Hon‟ble Supreme Court in PCIT vs. AbhisarBuildwellPvt. Ltd. to 6511/Mum/2025 Deepak Kakubhai Mehta [(2023) 149 taxmann.com 399 (SC)], which held that no addition can be made under Section 153A in respect of unabated assessments in the absence of incriminating material found during the search on the assessee, and following the aforementioned consistent judicial pronouncements of the Co- ordinate Benches, we hold that the additions made in the present case resting entirely on documents recovered from the search conducted in the case of Mr. Nilesh Bharani are legally untenable. The Revenue has neither invoked nor complied with the provisions of Section 153C, and hence, the assumption of jurisdiction under Section 153A in respect of these additions stands vitiated. Consequently, the additions made under Section 69 of the Act across all the assessment years under appeal are hereby directed to be deleted.

Consequentially, the additions made under Section 56 of the Act towards notional interest income on the said alleged cash loans quantified and tabulated by the Assessing Officer in paragraphs 5.29 and 5.30 of the assessment order for A.Y. 2012–13 are devoid of any independent legal or factual basis. These additions are purely derivative in nature, arising only from the presumption of unexplained investments having been made, and hence, cannot stand once the substantive additions under Section 69 have been found to be unsustainable. There is neither any primary transaction nor any independently discovered evidence which could justify the estimation of such income. In the absence of any corroborative or incriminating material found during the search, such additions are wholly speculative and deserve to be deleted. Accordingly, all the grounds of appeal pertaining to the additions made under Sections 69 and 56 across the assessment years in question are allowed, and the impugned additions are directed to be deleted in full.

The Assessing Officer has further brought to tax notional interest allegedly earned on the aforesaid cash loans under section 56 of the Act. The computation of such interest is based on estimated rates and on the assumption that the principal amount of cash loans was advanced and remained outstanding over the years.

At the threshold, it must be observed that the addition on account of notional interest is purely derivative in nature. It presupposes the existence of the principal transaction, namely, the advancement of cash loans. Once the substantive addition under section 69 is found to be unsustainable, the superstructure built thereon necessarily collapses. 61.1. Even otherwise, the Act does not permit taxation of hypothetical or imaginary income. Income-tax is levied on real income, and unless there is evidence of accrual or receipt of interest, no addition can be sustained. In the present case, there is no evidence to demonstrate that any interest was agreed upon, accrued, or received by the assessee.

The Assessing Officer has merely extrapolated figures based on assumptions, without any contractual basis or corroborative evidence. Such an exercise, howsoever arithmetically detailed, does not meet the threshold of legal sustainability. to 6511/Mum/2025 Deepak Kakubhai Mehta 63. Accordingly, the additions made under section 56 of the Act towards notional interest on the alleged cash loans are devoid of legal and factual basis and are liable to be deleted.

We now turn to the addition of ₹41,99,700/- made under section 69A of the Act in Assessment Year 2018-19 on account of jewellery found during the course of search and treated by the Assessing Officer as unexplained in the hands of the assessee.

The factual position, as emerging from the record, is that jewellery aggregating to ₹2,05,17,200/- was inventorised during the search. Out of the said jewellery, items valued at ₹1,63,17,500/- were accepted as explained and released. The balance jewellery valued at ₹41,99,700/- was seized, leading to the impugned addition.

Section 69A requires the Revenue to establish that the assessee is the owner of the jewellery and that the assessee has either offered no explanation regarding its acquisition or that the explanation offered is unsatisfactory. In the present case, the assessee consistently stated, both during the course of search and in subsequent proceedings, that the jewellery belonged to various family members, including his wife and son, and that it represented streedhan, gifts received on ceremonial occasions, and purchases made out of explained sources.

The relevant questions and answers recorded during the course of search, wherein the assessee and his wife explained to 6511/Mum/2025 Deepak Kakubhai Mehta the ownership and source of the jewellery have already been reproduced in the earlier part of the order.

The explanations furnished by the assessee were supported by documentary evidence placed on record during the assessment proceedings. However, the assessment order does not reveal any item-wise examination of such evidence. The rejection of the explanation is summary and conclusory, without assigning cogent reasons for disbelieving the assessee’s version.

It is well recognised that in Indian households, possession of jewellery by women and family members is a social norm, and the law does not require mathematical precision or contemporaneous bills for every item of jewellery held over decades. The Assessing Officer was duty-bound to examine the explanation in a holistic manner, keeping in view the social and economic background of the family. In the absence of any finding that the assessee was the exclusive owner of the jewellery, the addition made entirely in his hands under section 69A is misconceived. The provision cannot be invoked on surmises or presumptions.

On an overall consideration of the facts and circumstances, we are satisfied that the assessee has discharged the onus cast upon him under section 69A. The Revenue has failed to bring on record any material to dislodge the explanation offered. to 6511/Mum/2025 Deepak Kakubhai Mehta 71. We therefore hold that the addition of ₹41,99,700/- made under section 69A of the Act in Assessment Year 2018- 19 is unsustainable and is directed to be deleted.

In view of the foregoing discussion and findings, all the additions made under sections 69, 56, and 69A of the Act for the assessment years under consideration are deleted.

Since the appeals have been decided on the above grounds, the remaining grounds raised by the assessee, including those relating to procedural aspects and approvals, are rendered academic and are not adjudicated.