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Judgment
PER SATBEER SINGH GODARA, JM:
These assessee’s three appeals ITA Nos. 1 303 to 1305/Del/2026 for assessment years 2018-18, 202 0-21 & 2022-23 arise against the Commissioner of Income Tax (Appeals) (for short, ‘C IT(A)’), Delhi-26’s as many orders dated 13.01.2026 passed in DINs & order Nos. ITBA/APL/S/250/2025-26/1084730084(1), ITBA/APL /S/250 /2025 -26/1084732436(1) & ITBA/APL/S/250/2025-26/1084734029(1); respectively, involving proceedings u/s 271DA of the Income Tax Act, 1961 ; hereinafter referred to as, “the Act”.
Heard both the parties. Case file perused.
It transpires dur ing the course of hearing with the able assistance coming from bo th the parties that the learned lower authorities have levied sectio n 27 1DA penalties to Rs. 15 lakhs, Rs. 71,77 ,810/- & Rs. 2 ,59,09,418/-; assessment year wise, respectively in the Assessing Officer’s penalty order as upheld in the CIT(A) identical lower appellate discussion. What they hold in nutshell in other words is that the assessee has vio lated section 269ST of the Act whilst receiving the corresponding cash sums in issue.
This is what leaves the assessee aggrieved.
We have given our thoughtful consideration to the assessee and the Revenue’s respective vehement submissions. Suffice to say, there is no dispute betwee n the par ties that the learned departmental authorities had carried out sectio n 132 search action dated 02.03.2022 in M/s Gaursons & Divyansh Gro ups which included the asse ssee’s premises as well who receipts as well who happens to be the latter’s director. That being the case, we sought to ascertain the final status of the correspo nding quantum proceedings. We are infor med that the assessee’s appeal ITA No . 1831/Del/2026 in the fir st and foremo st year 2018-19 has already succee ded on 25.08 .2026; reading as under:
1.This appeal arises from order dated 22.01.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A)-26, Delhi.
1.1In this case, a search and seizure action was conducted on 02.03.2022 in the Gaurcons Group and Divyansh Group. The assessee’s residence was also covered (Indirapuram in Ghaziabad). During the course of the search operation conducted on the Divyansh Group the laptop of one Shri Dilip Jha, Accountant of the Group was cloned. An analysis of the contents of the laptop showed that there was an Excel file reflecting details of amounts received from one Shri Rakesh Sharma through cash and cheque. The aggregate amount received was Rs.1.65 crores and out of this for the year under consideration the cash amount shown as received is Rs.15,00,000/-. On the basis of this information and document so recovered a notice was served u/s 148 of the Act on 20.02.2024. Subsequently, the assessment was completed by making an addition of Rs.15,00,000/- u/s 69A of the Act.
1.2The aggrieved assessee approached the CIT(A) where his pleadings regarding there being no live nexus between the seized/recovered document (Excel sheet) and the assessee was not evident, did not find any favour with the first appellate authority.
1.3Further aggrieved, the assessee has approached the ITAT with 25 grounds of appeal through which the assessee has challenged the assumption of jurisdiction by the AO as also has put forth grounds denying any liability to be taxed on information/material recovered from third party, without any clarity on ownership of such transactions.
2.Before us the Ld. AR vehemently argued that none of the transactions mentioned in the Excel sheet pertained to the assessee and there was absolutely no evidence to show that any cash had been given to the assessee, as has been alleged by the Ld. AO. It was also stated that in the same Excel sheet some cheque payments are also mentioned and such payments do not reflect anywhere in the bank accounts of the assessee which were duly placed before the authorities below and the same are also placed for the perusal of this Bench in the detailed paper books filed. The Ld. AR drew our attention to the Excel sheet scanned and pasted in the assessment order, which for the sake of reference deserves to be extracted as under: -
Receiving from Rakesh Sharma
Date Amount 25.11.2016 50,00,000 Cash 27.11.2016 10,00,000 Cash 29.11.2016 10,00,000 Cash 13.04.2017 30,00,000 Cheque 461525 24.04.2017 10,00,000 Cheque 25652 27.04.2017 10,00,000 Cheque 461532 08.06.2017 5,00,000 Cheque 461538 16.06.2017 5,00,000 Rtgs 15.09.2017 15,00,000 Cheque 670632 20.10.2017 15,00,000 Cash 11.06.2019 5,00,000 Cash Total 1,65,00,000 It was argued that in none of the bank accounts maintained by the assessee and as disclosed before the authorities below, the Ld. AO has not been able to trace out whether at all the so-called cheque payments have been actually made to the assessee. It was the submission that the Ld. AO did not attempt to trace out the ultimate recipient of the cheque amount as that might have shed some light on the person against whom the transactions are actually shown. It was the submission that the Excel sheet (supra) was found in the possession of Mr. Dilip Jha, with whom there was no transaction of the assessee and this Excel sheet (supra) did not indicate the recipient of the funds indicated therein nor was any purpose or intention behind such payments visible from a perusal of the Excel sheet (supra). The Ld. AR further submitted that no opportunity was provided for any cross examination of Shri Dilip Jha and the Ld. CIT(A) has wrongly quoted Section 292C of the Act to say that the seized material had independent evidentiary value. It was the submission that even though Section 292C of the Act has been invoked it is clear from a plain reading of the said section that the presumption of ownership and knowledge of seized material is on the person from whom such material has been recovered during the course of a search. In this case, no such material has been recovered from the assessee that could lead to any corroboration regarding the figures mentioned in the Excel sheet (supra) and the assessee. It was averred that the presumption underlying Section 292C of the Act could not be used against the assessee.
2.1The Ld. DR relied on the detailed finding given by the Ld. CIT(A) and argued that Shri Dilip Jha was Accountant in the Divyansh Group whose founder is the assessee himself. Since Shri Dilip Jha was the Accountant and the Excel sheet was recovered from his laptop only then there was a clear nexus between the assessee and the said transactions (impugned). It was also argued that Section 292C of the Act led to a presumption that the material and documents recovered from the searched person was presumed to belong to him and in this case the impugned Excel sheet (supra) was recovered from the Accountant of the Divyansh Group thereby a direct nexus was clearly established between the said transactions and the assessee.
We have carefully considered the rival submissions and have gone through the records before us. We have also perused the documents contained in the paper books, including the bank accounts statements of the assessee which have been filed before the authorities below. It is evident that some transactions with one Shri Rakesh Sharma amounting to Rs.1.65 crores are mentioned in the Excel sheet (supra). It is seen that the exact relationship between the assessee and Mr. Rakesh Sharma have not been established and the most important evidence that could have linked the cash to the assessee could have been the money - trail as evidenced by the cheque payments mentioned in the same Excel sheet (supra). It is noticed, with a sense of regret, that for reasons best known to the Ld. AO the cheque payments have not been followed to determine if at all the assessee was the beneficiary thereon. In the absence of such enquiry and investigation at the Ld. AO's level we are constrained to agree with the Ld. AR/Assessee that there is no nexus between the assessee and the impugned payments. It needs to be emphasized again that there could have been a preponderance of probability that the cash payment and the cheque payment belonged to the same person in case the cheque payments had been proved to be received by the assessee. In this case, this is certainly not the fact. Furthermore, we find that there is an unnecessary reliance on Section 292C of the Act to simply saddle the assessee with the responsibility of denying the transaction mentioned in the Excel sheet (supra). This is even more important when the recipient of the cheque payments could have easily been found out and then the cash payments could have been presumed as part of the composite transactions. The reliance on Section 292C of the Act is even otherwise legally untenable in this case since the satisfaction of the Ld. AO appears to be placed on half-baked enquiries. In this regard, we are guided by the case of Ajanta Foot care (India) Private Limited reported in 84 taxmann.com 109 (Calcutta) [2017], where the following extracts are relevant:
"[2017] 84 taxmann.com 109 (Calcutta)
Ajanta Footcare (India) (P.) Ltd.
7.Mr. Khaitan, learned senior counsel appearing on behalf of the assessee, on the other hand, has argued that the manner in which presumption contemplated under the aforesaid provision shall be drawn is in the discretion of the authority concerned and in support of his submission he has relied on a decision of the Supreme Court in the case of P. R. Metrani v. CIT [2006] 287 ITR 209/157 Taxman 325. In this judgment, dealing with the provision under Section 132(4A) of the Act, it was held by the Supreme Court:-
'A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume" and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. In this sense such presumption is also rebuttable. "Conclusive proof" gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption.
The words in sub-section (4) are "may be presumed". The presumption under sub-section (4A) therefore, is a rebuttable presumption. The finding recorded by the High Court in the impugned judgment that the presumption under sub-section (4A) is a irrebuttable presumption in so far as it relates to the passing of an order under sub-section (5) of Section 132 and rebuttable presumption for the purpose of framing a regular assessment is not correct. There is nothing either in Section 132 or any other provisions of the Act which could warrant such an inference or finding.'
8.In our analysis, the ratio of the judgment in the case of Mahavir Woollen Mills (supra), does not apply in this case. In the judgment of Mahavir Woollen Mills (supra), the Hon'ble Delhi High Court has explained the context in which a question of fact can get transformed into a question of law:—
" The issue raised by the assessee in the appeal cannot be said to involve any question of law, much less a substantial question of law. A question of fact becomes a question of law, if the finding is either without any evidence or material, or if the finding is contrary to the evidence, or is perverse or there is no direct nexus between conclusion of fact and the primary fact upon which that conclusion is based. But, it is not possible to turn a mere question of fact into question of law by seeking whether as a matter of law the authority came to a correct conclusion upon a matter of fact."
9.The interpretation given by the Hon'ble Supreme Court in the case of P. R. Metrani (supra) so far as the construction of the expression "may be presumed" is concerned does not support Ms. Das De's submission. Ms. Das De seeks to counter this submission referring to provisions of 292C of the Act. Her stand is that the Statutory Appellate Authorities ought to have concluded that unexplained expenditure reflected in the aforesaid document constituted undisclosed income of the assessee and such conclusion was inevitable. We, however, find applying the ratio of the judgment of the Supreme Court in the case of P. R. Metrani (supra), that the legislature in employing the expression may be presumed left it to the discretion of the statutory bodies to decide as to whether the fact sought to be established by the Revenue is to be presumed or not in the manner the Revenue wants to. It is not legislative mandate to impute duty on the authority to presume certain fact which may be the case where the law requires that an authority shall presume certain facts. So far as the subject-document is concerned, both the Statutory Appellate Authorities found insufficient evidence to link the document with the assessee in the first place. Thus, primary fact was not established from which presumption could be drawn."
We are further informed very fairly by both the parties that the relevant facts in the tw in assessment years 2020-21 & 2022-23 stand very much on identical footing although the quantum addition(s) have not been deleted. Be that as it may, we are of the co nsidered view that o nce the learned co -ordinate bench has already applied its mind on the very excel sheet whilst concluding that there was no cash compone nt involved, the very reasonings would apply in the latter twin assessment years as well. We thus conclude that in the first and foremost year 2018-19, the impugned section 271DA penalty as no legs to stand in preceding terms and the assessee’s case in the latter twin years also deserves to be succeed in very terms. We order accordingly. The Revenue ’s vehement contentio ns supporting the impugne d identical penalty(ies) is hereby rejecte d therefore.
These assessee’ s three appeals ITA Nos. 1303 to 1305/Del/2026 are allowed in abo ve terms. A copy of this common order be placed in the respective case files.