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Judgment
This is a batch of four appeals pertaining to the same Assessee for Assessment Years 2013-14 to 2016-17. For the sake of convenience, AY 2013-14 (ITA No.2763) is taken as the lead case. ITA No.2763 arises from order dated 09.02.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A)-3, Gurgaon.
In all these four cases the underlying facts are the same and it is seen that a search was conducted in the case of ELVI Group of Companies on 28.02.2017. During the course of search certain documents labeled as Annexure-10 relating to the assessee under consideration, were found and seized. It is pertinent to mention that two receipts of Rs.25,00,000/-each were found and seized from the premises of ELVI Group indicating that Rs.25,00,000/- each was received by one Shri Abhay Salwan and M/s R.A. Financial Services from the assessee. Since these receipts have a material bearing on the adjudication in this case, we may reproduce the contents of the same as under: -
“Received sum of Rs.25,00,000/- in cash from Mrs. Renu Gulati w/o Mr. O.P. Gulati R/o 104, Sector-15, Faridabad on 15.12.2011 as unsecured loan for a period of 1 year @3% interest per month.”
Both the receipts are identically worded with the signature of Shri Abhay Salwan, one in his individual capacity and the other for R.A. Financial Services clearly seen thereon. The Ld. AO initiated proceedings u/s 153C of the Act and thereafter proceeded to add Rs.18,00,000/- by estimating interest income @36% p.a. on an amount of Rs.50,00,000/-.
The aggrieved assessee approached the CIT(A) where after a detailed discussion on merit, the Ld. CIT(A) reduced the addition to Rs.9,00,000/- by holding that an interest rate of 18% p.a. was more reasonable. It is seen from the impugned order that the Ld. CIT(A) was persuaded to reduce the quantum of addition on the ground that there was no independent evidence collected by the Ld. AO to show that interest @36% p.a. was actually received by the assessee.
The assessee has now approached the ITAT with grounds challenging the assumption of jurisdiction and also challenging the addition on merit by stating that notional income has been taxed even when no concrete evidence for any earning of such income has been brought on record by the Ld. AO.
Before us the Ld. AR stated that the assessee has all along denied any transaction with Shri Abhay Salwan. It was the submission that there was no corroborating evidence to show that any amount has been received by the assessee from Shri Abhay Salwan. It was further submitted that Shri Abhay Salwan is a Proclaimed offender who has been absconding since long and in such a situation even otherwise there could be no income from such person. The Ld. AR submitted, without prejudice to his main argument, that the two receipts forming basis of the impugned additions clearly indicate that the amounts were given on 15.12.2011 as unsecured loan for a period of one year. It was averred that even if for the sake of argument, the document was considered to represent actual financial dealings then also the scope of the transaction could not extend beyond one year from 15.12.2011. In line with this argument, it was the submission that assessment years 2014-15 to 2016-17 were devoid of any seized material having any nexus with the assessee.
The Ld. DR, on the other hand, vehemently argued that two clear receipts were found in the name of the assessee from the searched persons/entities and the assessee could not deny the veracity of the same. It was the submission that the Ld. CIT(A) had adopted a judicious approach in restricting the addition on account of interest earned to Rs.9,00,000/- instead of Rs.18,00,000/- p.a.
We have considered the rival submissions and have gone through the records before us, including the paper book filed by the Ld. AR and certain coordinate bench ITAT orders relied on. A perusal of the seized material reveals that the impugned transaction was for one year, beginning 15.12.2011, thus, there is no reason to presume that the transactions had any dynamic beyond AY 2013-14. We are conscious of the fact that there is no independent corroboration of this seized material with respect to any actual receipt of interest income by the assessee. We find that the assessee had raised a specific ground (GOA- 7) in Form 35, whereby the fact of Shri Abhay Alwan being a Proclaimed offender has been raised to deny any receipt of sums of money from a person who was not traceable. Considering the totality of facts and circumstances of the case, it is felt that the fact of Shri Abhay Salwan being a Proclaimed offender deserves to be examined further in assuming any income to arise on his behalf vis-a-vis the assessee. We are also conscious that this particular fact was duly brought to the notice of the Ld. CIT(A) through a specific ground of appeal extracted on page 4 of the impugned order for AY 2013-14. In case it can be established that Shri Abhay Salwan was absconding during the entire period of AY 2013-14 then there is every possibility that no amount was received by the assessee. However, we do not deem it fit to enter the realm of speculation and deem it fit to set aside the impugned order for AY 2013-14 and remit this matter back to the file of Ld. AO for examination of the claim of the assessee about firstly, there being no transaction whatsoever with Shri Abhay Salwan and secondly, to examine if at all the promised interest could have been received by the assessee even when Shri Abhay Salwan was a Proclaimed offender. Needless to say, the assessee would cooperate with the Ld. AO in determining the facts since there is considerable circumstantial evidence to show that either the assessee or her husband, Shri O.P. Gulati, did have business dealings with Shri Abhay Salwan or entities controlled by him. The Ld. AO, on his part, would provide ample opportunity of being heard and would use inherent powers to summon for necessary details in this case from any business entity or concerned authority.
Regarding assessment years 2014-15 to 2016-17, we are persuaded by the two incriminating documents to hold that the transactions indicated therein only pertained to a period of one year from 15.12.2011. Thus, clearly the other assessment years are beyond the scope of the contents of the incriminating material. The additions made in these three years are directed to be deleted.
In the result, ITA No. 2763 is partly allowed for statistical purposes. ITA Nos. 2840 to 2842 are allowed.