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Judgment
PER AMITABH SHUKLA, AM,
This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax(Appeals)-29, New Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 06.08.2025 arising out of assessment order dated 29.03.2023 passed under section 153C of the Income Tax Act, 1961, for the Assessment Year 2018-19. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.On the facts and in the circumstances of the case and in law, CIT(A) erred in sustaining proceedings u/s.153-C in the Assessee's case, which are bad in law and without jurisdiction.
2.On the facts and in the circumstances of the case and in law, CIT(A) erred in sustaining proceedings based on search in the case of Mr. Sanjay Jain.
3.On the facts and in the circumstances of the case and in law, CIT(A) erred in sustaining addition of Rs.2,10,000/- on account of alleged interest paid by the Assessee, under section 69-C, read with section 115-BBE of the Act.
A perusal of above-mentioned grounds of appeal allude that the appellant assessee has contested the impugned appellate order dated 06.08.2025 both on legal grounds of jurisdictional insufficiency as well as on the merits of the addition. We would like to take the grounds concerning merits of the addition first.
The ld. Counsel for the assessee appraised us of the following brief factual matrix of the case. The assessee had declared income of Rs.21,21,730/-through its Return of Income dated 08.08.2018. Meanwhile, a search and seizure u/s 132 was carried out on 06.02.2019 upon Shri Sanjay Jain in relation to original search proceedings on the Kochar Group. Several incriminating documents comprising hard data and soft digital evidences was found and seized. It transpired therefrom that Shri Jain was engaged inter alia in betting activities in sports and Cricket, forwarding cash loans, earning interest income of the same. The Ld. AO has recorded in the order availability of incriminating documents showing connection between Shri Jain and the assessee. Notice u/s 153C dated 07.09.2022 was issued to the assessee. The ld. AO noted that there was a whatsapp chat between the assessee and Shri Sanjay Jain, which alluded towards fact of the assessee communicating for a transaction of ’35 ok’ and exchange of ‘02 currency note numbers’. Applying hypothesis of human probability, the ld. AO construed the said transaction as giving a cash loan of Rs.35 lakhs from assessee to Shri Jain. The ld. AO postulated that going by the market rate of interest of 2% for an estimated period of 3 to 4 months on the said cash loan of Rs.35 lakhs, the assessee was liable to earn an income of Rs.2.10 lakhs. Accordingly, he proceeded to add the amount of Rs.2.10 lakhs while following remarks available on page-8 of the assessment order:-
“It shall be necessary to mention here that Sh. Sanjay Jain has been, apart from dealing in Cash Loans, Betting and Money Transfer Activities, has been found dealing in the disputed properties and earns a huge unaccounted profit in such deals. Apart from this, Shri Sanjay Jain is also working as a money-handler for various persons and arranges safe and profitable investment for them. The main source of unaccounted income of Sh. Sanjay are property dealing in the properties by which he has accumulated huge wealth and has also acquired many properties in his name or in the name of his family members Sh. Sanjay Jain has accumulated huge unaccounted cash from the sale/purchase or dealing in the properties. Many incriminating materials including WhatsApp chats were recovered divulging that he lend huge amount as unaccounted loan to various persons and charge interests on these loans. As per the information, Sh. Sanjay Jain charges interest from 2% to 3% per month. He also lends out money received from various persons for whom he works as a handler like assessee herein.
10.Therefore, referred details of WhatsApp are flagrantly showing Assessee has taken delivery of amount equivalent of Rs.35,00,000/-as cash loan from Sh. Sanjay Jain, in clear violation of Section 269SS of the Income Tax Act, 1961, which certainly is more than Rs. 20,000/- as prescribed. Therefore, appropriate proposal for initiation of penalty u/s 271D of the Income Tax Act, 1961 shall be moved in due course for the apparent violation of Section 269SS of the Income Tax Act, 1961.
11.Since the assessee has taken cash loan, possibility of payment of interest thereon cannot be ruled out and having regard to the trend and practice followed by Sh. Sanjay Jain, he charged interest @2% per month on the short-term loans, given for a period of 3 to 4 months only, on high rate of interest. Therefore, considering this proposition itcan be concluded hat Assessee has paid interest on such cash loan for 3 months, which is calculated at Rs.2,10,000/-, being treated as unexplained/undisclosed expenditure, to be added to the total income of the Assessee, u/s 69C of the | T Act 1961 to be taxed applying rates of tax as prescribed u/s 115BBE of the Income Tax Act, 1961 for relevant assessment year.
(Addition of Rs, 2,10,000/- u/s 69C of the Act)
Since the income of assessee contains an income u/s 69 of the Income Tax Act, 1961. where tax is being calculated u/s 115BBE of the Income Tax Act, 1961, separate penalty proceeding u/s 271AAC of the Income Tax Act, 1961, is also initiated simultaneously.”
Aggrieved by the impugned addition, the assessee approached ld. CIT(A) who confirmed the addition made by the ld. AO as evident from para-7.2 and 7.3 of his order.
The ld. Counsel for the assessee reiterated the arguments taken before the ld. AO and attempted to demonstrate that there was no merit in the hypothesis drawn by the ld. AO to make the impugned addition. Shri S. Krishna, Advocate argued that the entire is based upon conjectures and surmises and there are no hard facts to support the theory. It was suggested that the ld. AO and ld. CIT(A) have misconceived the entire facts by assuming 35K as meaning 35 lakhs. The ld. Counsel further argued that the evidence comprising whatsapp chat is itself inadmissible as the protocol mandated for admission of electronic evidences was not followed. It was accordingly requested that the said addition be directed to be deleted.
Ld. DR would like to make us upon the correctness of the orders of the lower authorities.
We have heard the rival submissions in the light of material available on record. We have noted from the observations of the ld. AO extracted hereinabove as well as those recorded by Ld. CIT(A) in para-7.2 and 7.3 of his order that the entire addition of Rs.2.10 lakhs is resting upon a theory of human probability and of conjectures and surmises. At the outset, nothing has been brought on record to allude as to how 35K would mean Rs.35 Lakhs. Other than the whatsapp communication, there is no cogent evidence on records. The Revenue has also not been able to satisfy fulfilment of mandatory protocol required for admission of additional evidences. Accordingly, we are of the considered view that there is no case made out for making any addition of Rs.2.10 lakhs in the hands of the assessee on the basis of allegation of receiving interest in cash on unaccounted cash loan given to Shri Sanjay Jain. We, therefore, set-aside the orders of the lower authorities, and direct the AO to delete the addition of Rs.2.10 lakhs. The assessee succeeds qua grounds of appeal raised challenging the merits of the addition.
As the assessee has succeeded qua grounds of appeal raised challenging the merits of the addition, all other legal grounds of appeal challenging insufficiency of jurisdiction have been dismissed as infructuous.
In the result, the appeal of the assessee is partly allowed.