Gaurav Agarwal vs DCIT, Central Circle- 19

PER MANISH AGARWAL, A.M.:

These three appeals are filed by the Assessee against the common order of ld. Commissioner of Income Tax (Appeals)-27, New Delhi [“Ld. CIT(A)”], dated 15.12.2025 arising out of different assessment orders, all dated 19.02.2025 passed u/s 147 r.w.s. 143(3) of the Income Tax Act, 1961 (“the Act”) for Assessment Years 2021-22 to 2023-24 respectively.

Before us, both the parties have admitted that the facts involved in all the three captioned appeals are common, therefore, they are taken together and decided by a common order.

First we take up the assessee’s appeal for Assessment Year 2021-22 in ITA No. 848/De/2026.

Brief facts of the case are that a search and seizure action u/s 132 of the Act was carried out in the case of M/s. Tej Ram Dharam Paul & Others on 03.08.2022. The premises of Shri Rahees Ahmad and Shri Rasool Ahmad located at Mohalla Mulla Tola Patiyyali, Kasganj, Uttar Pradesh were also covered under search wherein certain loose paper and documents as well as digital data was found and seized. The assessee filed his original return of income, declaring total income of INR 7,02,980/- on 15.03.2022 which was updated on 27.12.2022 at an income of INR 7,13,940/- by offering the additional income of INR 10,963/- being the profit earned on alleged cash purchases of INR 2,47,000/-. Thereafter, based on the material found/seized during the course of search in the case of Shri Rahees Ahmad and Shri Rasool Ahmad, the case of the assessee was re-opened by issue of notice u/s 148 on 23.10.2023. In response, the assessee has stated that updated return of income filed on 27.12.2022 be treated as “return filed in response to notice issued u/s 148”. Thereafter, notice u/s 143(2) was issued followed by various notices issued u/s 142(1) alongwith questionnaire from time to time. The AO observed that during the course of search carried out in the case of Shri Rahees Ahmad and Shri Rasool Ahmad, certain WhatsApp chats were found from the mobile of Mr. Rahees Ahmad according to which certain cash transactions were carried out between the assessee and Mr. Rahees Ahmad. The assessee explained that he had made certain unaccounted transaction of purchases of Iron scrap from Delhi and since Shri Rahees Ahmad and Shri Rasool Ahmad were engaged in the business of trading of tobacco and had made sales in Delhi from where they had received cash payments. Therefore, assessee requested them to make the payment in cash to the parties from whom assessee had made the purchases and in turn, assessee had given cash to them in Kasganj. As the assessee has not recorded such purchases in the books of accounts maintained, he had offered profit earned on such unaccounted purchases in the updated return of income filed. The AO by observing that there was no evidence that cash was given to Mr. Rahees/Rasool Ahmad at Kasganj by the assessee, therefore, addition was made of the said amount as income of the assessee u/s 56 of the Act.

Against the said order, assessee preferred an appeal before ld. CIT(A) who vide impugned order dated 15.12.2025, dismissed the appeal of the assessee.

Aggrieved by the order of ld. CIT(A), assessee is in appeal before the Tribunal by taking following Grounds of appeal:

During the course of hearing, the assessee has taken additional Grounds of appeal which reads as under:-

During the course of hearing, the assessee has not pressed Ground of appeal Nos. 2 & 3 therefore, they are dismissed as not pressed.

With respect to Ground of appeal Nos.4 & 4.1, ld. AR for the assessee has submitted that the assessee is engaged in trading business of Iron scrap in Kasganj and besides the purchases declared in the books of accounts maintained, also had made purchases in cash from the suppliers at Delhi & Uttar Pradesh which were not recorded in the books of accounts. Both Shri Rahees Ahmad and Shri Rasool Ahmad are brothers doing trading business of Tobacco at Kasganj and received sales consideration in cash of the goods sold in Delhi. Though the assessee has no relationship with both the Ahmed brother however, due to local resident, they were well known to the assessee. With the intention to avoid the movement of cash, assessee requested them to make cash payment on his behalf to the parties from whom assessee has made purchases in Delhi and subsequently, assessee has paid cash to them in Kasganj. For this purpose, many chats were exchanged between them which were found in whatsApp chat in the mobile phone of Ahmed brothers during the course of search. Ld.AR submits that in the statements recorded u/s 132(4), both of them accepted this fact and further when the assessee was confronted with their statements, assessee also affirmed these facts. Ld.AR submits that assessee had filed updated return wherein the assessee has declared additional profit on such unaccounted cash purchases made for which the payments were made by Ahmed brothers at Delhi and submits that since the assessee has already paid tax on such purchases, no further addition should be made. Ld.AR submits that AO on mere assumption and presumption held that there was no evidence of cash payment by the assessee to Ahmad brother against the payments made by them in Delhi and accordingly, addition was made in the hands of the assessee as income u/s 56 of the Act of such cash payment. Ld.AR submits that in the statements recorded u/s 132(4) of the Act of Shri Rahees Ahmad and Shri Rasool Ahmad, they both has accepted the fact that cash was received by them in Kasganj from the assessee against the cash paid at Delhi on behalf of assessee. The ld. AR further drew our attention to the statement of the assessee on 04.08.2022 u/s 131(a) of the Act placed at pages 69 to 87 of the Paper Book wherein the assessee has explained the modus operandi of the entire transactions in reply to Question Nos. 16 to 21. Ld.AR submits that in the said statement, the assessee had admitted that he had made cash payments against the amounts paid by both the brothers at Delhi. Ld.AR further drew our attention to page 17 of assessment order wherein statements of Mr. Rahees Ahmad were reproduced. It is thus, requested that no addition could be made for the amount of alleged cash purchase made by the assessee u/s 56 of the Act. He prayed accordingly.

On the other hand, ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that all these facts were stated by the assessee before the lower authorities and were considered before making the additions. Ld. CIT DR submits that in absence of any evidence submitted by the assessee that these transactions were recorded in the books of accounts of appellant as well as in the books of accounts of Mr. Rasool Ahmad and further no evidence was filed indicating that the assessee has paid cash to the Ahmed brother, the verbal plea cannot be accepted. He therefore, prayed for the confirmation of the additions made and uphold by the lower authorities.

Heard the contentions of both the parties at length and perused the material available on record. It is an admitted fact that the assessee has made purchases in cash which was not recorded in the books of accounts and payments in cash at Delhi against such unrecorded purchases were made by taking services of Shri Rahees Ahmad and Shri Rasool Ahmad who paid cash on behalf of the assessee to the suppliers at Delhi and in turn, received cash from the assessee at Kasganj. The lower authorities had not accepted this entire transaction by alleging that no evidences were filed/found with respect to the payment made by the assessee to the Ahmed brothers. Once it is admitted that such transactions of purchases from Delhi were unrecorded and made out of the books. Further WhatsApp chats were found in the mobile of Ahmad brothers evidencing the payments made by them in cash at Delhi on behalf of the assessee. These facts were admitted by both the brothers as well as by the assessee in the statements recorded before the Investigation Wing. As these transactions are unaccounted therefore, they were not found recorded in the books of accounts nor any such evidences could be produced to justify that the cash was paid by the assessee to the Ahmed brothers. As observed above, these facts were admitted by the assessee as well as Shri Rahees Ahmad and Shri Rasool Ahmad in their respective statements recorded during the course of search which has been made the basis for initiating the proceedings u/s 147 in the case of the assessee. Once the Revenue has considered the part of such statement as correct, the other part of the statement could not be ignored where the assessee has explained the modus operandi of the transactions and admitted the fact that cash was paid to Ahmed brother in Kasganj in reply to Question No.17 reproduced at page 9 to 10 of the assessment order. It is also a matter of fact that the AO has accepted the additional income declared on such unaccounted purchase in the updated return of income filed and therefore, in our opinion, further addition could not be made as income from other source u/s 566 of the Act alleging the same as cash receipts from Ahmad brothers. In view of above discussion and considering the overall facts of the case, we delete the addition made by the AO. The Grounds of appeal Nos. 4 & 4.1 raised by the assessee are thus allowed.

Since we have allowed Ground of appeal Nos. 4 & 4.1 and deleted the additions made, the other Grounds of appeal taken on legality of the reopening of assessment in the original Grounds as well as additional Grounds of appeal became academic and hence, not adjudicated.

In the result, appeal of the assessee is allowed.

In the above paras, we have allowed the appeal of the assessee in ITA No.848/Del/2026 for Assessment Year 2021-22 and deleted the additions made on account of cash payment made towards unaccounted purchases. Admittedly, facts are identical in these two years also before us, therefore, by following the aforesaid observations in ITA No. 848/Del/2026 for AY 2021-22 which are Mutatis Mutandis applicable to the facts of these captioned appeals also, the additions made u/s 56 of the Act in both the captioned appeals are deleted.

In the result, both appeals of the assessee are allowed.

In the final result, all three [03] captioned appeals of the assessee in ITA Nos. 848 to 850/Del/2026 for Assessment Years 2021-22 to 2023-24 respectively, are allowed.