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Facts
During a search on the assessee's husband, a diary containing loan details was found. The Assessing Officer (AO) presumed a "deficiency of two zeros" in the entries, inflated loan amounts, and added unaccounted interest income to the assessee for multiple assessment years, which the CIT(A) upheld.
Held
The Tribunal, following its decision in a lead case, rejected the AO's presumption as hypothetical and without evidence, noting that the assessee and other parties confirmed the original figures. Citing Section 292C and various High Court/Supreme Court judgments, the Tribunal held that additions based on suspicion and arbitrary assumptions cannot be sustained. Thus, all impugned additions of interest income were deleted.
Key Issues
Whether additions for unaccounted interest income based on the Assessing Officer's presumption of a "deficiency of two zeros" in seized diary entries, despite contrary evidence and legal precedents, can be sustained.
Sections Cited
153A(1)(b), 143(3), 132(4), 292C
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI LALIET KUMAR, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Per Bench 1. The sole issue in aforesaid appeals by assessee for Assessment Years (AY) 2013-14 to 2017-18 is addition of unaccounted interest income, aggregating in all to Rs.3.75 Lacs. The aforesaid appeals were heard along with other appeals of the assessee-group. The lead order has been passed by us in the case of Shri Arvind Kumar Aggarwal (ITA Nos. 343/Chandi/2025 & ors.). It was admitted position that facts as well as issues, qua this addition, are pari-materia the same and therefore, our adjudication therein would equally apply to all these appeals. In the above background, the appeals are disposed-off as under. 2. The impugned addition stem from search action by the department on assessee-group on 21-03-2017. The assessment for AY 2013-14 has been framed u/s 153A(1)(b) r.w.s. 143(3) of the Act. During search on residence of assessee’s husband, Shri Arvind Kumar Aggarwal, a Neelgagan Diary was found which contained details of loans and advances as advanced by Shri Arvind Kumar Aggarwal to various persons. The dairy was marked by the wing as Annexure A-
1. 1.
3. The Ld. AO presumed that the figures as mentioned therein were deficient by two zeros. The said diary reflected advance by the assessee to her husband for Rs.6000/- with rate of interest of 1.25%. The assessee stated that the amount was nominal and advances were out of withdrawals. However, Ld. AO, presuming loan of Rs.6 Lacs, worked out interest of Rs.15,000/- and made addition thereof in the hands of the assessee. Similar addition was made in all the other years also. The Ld. CIT(A) upheld the action of Ld. AO against which the assessee is in further appeals before us.
We find that presumption of deficiency of two zeros has been rejected by us in the case of Shri Arvind Kumar Aggarwal (supra) as under: - 6. The first addition of unexplained investment and consequential interest income is based on entries found noted in a Neelgagan Diary which was found from the residence of the assessee. This diary was having 27 pages and the same was marked as Annexure A-3. The same contained details of loans and advances and repayment thereof on various dates by different persons in cash. Each written page, at the top, had rate of interest mentioned along with the name of the person and in many cases, their phone numbers. Initially, it was the contention of the assessee that these transactions were carried out by Shri Sachin Aggarwal (one of partner of M/s C.M. Jewellers). However, Ld. AO rejected the same on the ground that the assessee owned up the transactions in recorded statement u/s 132(4). Further, at few places in the dairy, the signatures of the assessee were found. Therefore, the presumption of Sec.292C that the contents of the diary were true and the document belonged to the assessee, was raised against the assessee to make impugned addition in the hands of the assessee. We concur with these findings of lower authorities. Considering the facts that the assessee was engaged in money lending business and the diary was found from the residence of the assessee, the conclusion of lower authorities, in this regard, could not be faulted with. The dairy as well as contents thereof has righty been considered to be belonging to the assessee. We order so.
Proceedings further, considering one figure of interest as found noted as Rs.100000/- on Page No.6 (kept on Page No.27 of the paper-book) containing details of loan advanced by assessee to Shri Asheem Goel and payment of interest by that person to the assessee, Ld. AO has concluded that all the other figures, on all the pages, were deficient by two zeros. The interest of Rs.1 Lacs would work out only if two zeros were added to the loan transactions. On the basis of the same, Ld. AO has drawn similar conclusion for all the other entries as found noted in the diary. However, the presumption u/s 292C would an equal application here also and the presumption deems that the contents of the diary were true unless contrary was shown. As per deeming fiction, the contents of the diary are to be taken to be true, unless contrary was shown or established. We find that, to refute the allegation of Ld. AO, the assessee furnished affidavit of Shri Asheem Jain confirming the figures as found mentioned in the diary. At the same page no.6, it has been mentioned that the interest of Rs.3000 was received from him which has completely been ignored by Ld. AO and presumption of deficiency of two zeros has been made without there being any concrete evidence to support the same. The assessee also filed affidavit / confirmation from most of the parties confirming that they obtained loans in thousands of rupees only. The investigating officer also recorded the statement of all the parties who have confirmed these transactions. All the parties denied allegation that the figures in the diary were missing by two zeros and instead confirmed the contents of the dairy. When the assessee as well as party to the transitions admitted true details of the transaction between them and all denied the figures to be missing by two zeros, Ld. AO could not ignore the same and proceed to make addition as per his own assumptions / presumptions. The assumption made by Ld. AO was a hypothetical assumption only without there being any basis or any concrete material on record to support the same.
The Hon’ble Apex Court, in the case of Umacharan Shaw & Bros. (37 ITR 271), clearly held that the suspicion however strong could not take place of proof. The action of Ld. AO is quite contrary to the provisions of Sec.292C which raises a presumption that the contents of seized material were true. There is no presumption available to Ld. AO to modify the contents of the documents as per its own whims and fancies. The Ld. AO ignored the contents of the document and applied his own presumption. The Hon’ble Delhi High Court in the case of CIT vs. Girish Chaudhary (296 ITR 619) rejected similar assumption of Ld. AO and upheld the order of Tribunal on the ground that there was no material on record to show as to on what basis the Assessing Officer had reached the conclusion that the figure ‘48’ was to be read as Rs. 48 lakhs. Similar analogy has been laid down in the decision of Ved Prakash Chaudhary (305 ITR 245). The Hon’ble Apex Court in the case of Mehta Parikh & Co. (30 ITR 181) rejected additions without there being any adverse evidence and where the addition was made on suspicion without countering affidavit / statement on record. The jurisdictional High Court in the case of Ravi Kumar (294 ITR 78) rejected additions which were made without corroborating evidences. Similar is the decision in Atam Valves Pvt. Ltd. (332 ITR 468). The Chandigarh Tribunal in the case of Harvinder Pal Singla (ITA 456-458/Chd/2014) has rejected similar assumption as made by Ld. AO. The other decisions as cited by the assessee during first appeal reinforces the said proposition and reject arbitrary assumption of facts by Ld. AO.
Finally, considering the facts and circumstances of the case, we would hold that the impugned addition of unexplained investment and consequential estimation of interest income could not be sustained in law. Considering the contents of the diary, sufficient surrender has already been made by the assessee. The contents of the diary as well as cash flow statement would establish that the quantum of unexplained investment was merely Rs.2,89,281/- which has nowhere been controverted by lower authorities. Accordingly, both these additions viz. addition of unexplained investment and consequential interest income stand deleted. The assessee succeeds in its corresponding grounds of appeal.
1. 1. Taking the same view, we delete the impugned additions of interest income, for all the years, as made by Ld. AO. All the appeals stand allowed on merits accordingly. The legal grounds have been rendered mere academic in nature.
All the appeals stand partly allowed. Order pronounced on 09th March, 2026.