Subash Chander Gupta vs DCIT

PER MANISH AGARWAL, AM :

The captioned appeals filed by the Assessee arising out of the respective orders of the Commissioner of Income Tax (Appeals)-30, New Delhi [“Ld. CIT(A)”] passed under s. 250 of the Income Tax Act, 1961 [the Act] emanating from respective assessment orders passed by the Assessing Officer [“AO”] tabulated hereunder:

Since all the appeals filed by the assessee are having common, identical and similar issues, therefore, they are decided by a common order.

First we take appeal of the assessee in ITA No. 5533/Del/2025 [Assessment Year 2016-17].

Brief facts of the case are that the assessee filed his return of income on 29.07.2016, declaring total income at INR 36,92,170/-. A search and seizure action was carried out in the case of Manoj Kumar and his close associates and various other parties on 14.10.2020 u/s 132 of the Act. The premises/locker of the assessee were also covered during the search. Thereafter, proceedings u/s 153A of the Act were initiated in the case of the assessee. The assessee has derived income from salary and from other sources. During the course of search, one ledger book was found and seized marked as Annexure “A-4” from his residence at 145, Bahera Enclave, Paschim Vihar, New Delhi wherein cash and bank transactions carried out by the assessee were recorded. In the said ledger books, two types of transactions were noted:-

The AO reproduced certain portion of the dairy in assessment order where after verifying the bank entries found recorded in the said papers, concluded that the remaining entries are of cash transaction carried out by the assessee of loans and advances and accordingly, the addition of INR 27 Lakhs on account of cash payment made as per the said diary is added u/s 69 r.w.s. 115BBE of the Act as unexplained.

Against the said order, the assessee preferred appeal before Ld. CIT(A) who confirmed the action made by the AO and dismissed the appeal of the assessee.

Aggrieved by the order of Ld. CIT(A), the assessee preferred appeal before Tribunal by taking various Grounds of appeal mentioned in the appeal memo.

Ground of appeal Nos. 1 to 4 raised by the assessee are with respect to the initiation of proceedings u/s 153A of the Act.

Before us, no effective submissions was made with respect to the Grounds of appeal Nos. 1 to 4 therefore, the same are dismissed.

Ground of appeal No.5 raised by the assessee is with respect to the addition of INR 27 Lakhs made u/s 69 r.w.s. 115BBE of the Act which stood confirmed by Ld. CIT(A).

Heard the contentions of both the parties at length and perused the material available on records. It is observed that during the course of search, one ledger book titled as Annexure “A-4” was found and seized from the possession of the assessee containing ledger accounts of transaction of receipt and payments of cash loans and advances and further the expenditure paid in cash recorded on day-to-day basis.

In the said dairy, details of party-wise transactions were recorded for both cash as well as made through banking channel. Admittedly, said diary was maintained by the assessee. Since the assessee has failed to establish the source of INR 27 Lakhs paid in cash as found noted in the said diary, therefore, we find no error in the order of Ld. CIT(A) in confirming the addition of INR 27 Lakhs which is hereby, upheld. Ground of appeal No.5 raised by the assessee is dismissed.

Since no submission were made in respect of Grounds of appeal No. 6 & 7 raised by the assessee therefore, the same are dismissed.

In the result, appeal of the assessee is dismissed.

Ground of appeal Nos. 1 to 4 raised by the assessee are with respect to the initiation of proceedings u/s 153A for which no submission is made therefore, these grounds of appeal are dismissed.

Ground of appeal No.5 raised by the assessee is with respect to the addition made towards unexplained investment u/s 69 of INR 1,20,86,000/- and Ground of appeal No.6 raised by the assessee is with respect to the addition of INR 67,63,628/- made u/s 69C of the Act on account of unexplained expenditure alleged as found noted in the seized diary.

Before us, Ld.AR requested that since the issue involved in both the Grounds of appeal are linked with each other and submits that the AO has treated the entries of cash transactions found noted in the diary marked as Annexure “A-4” seized during the course of search from the possession of the assessee wherein AO has treated following Two types of transactions noted therein separately :-

Ld. AR submits that diary contained unaccounted as well as accounted for transactions and the AO after verification of the transactions which are recoded in the books of account, reduced the same and has made separate additions of excess receipts over payments of cash loans u/s 69A of the Act and for excess of cash payment of expenditure over income by holding the same as unexplained expenditure u/s 69C of the Act.

Ld. AR submits that assessee was finance broker and soliciting finance and had earned brokerage on these transactions. Since all the transactions of cash loans received/given and also receipt of income and expenditure in cash are found noted in the same seized diary and this fact is not in dispute and all these are not recorded in the regular books of accounts, therefore, they should be taken together and addition, if any, should be made for brokerage earned prevailing in the market between 0.50% to 2% of the total receipts.

Ld. AR submits that the immediate source of the cash loans advanced and cash expenditures recorded in the diary were out of the receipts of cash also found noted in the same diary, therefore the source of such outgoing is self-explanatory. Ld. AR further submits that the AO has verified all the transactions carried out through banking channel recorded in the diary and no adverse inference was called for on such transactions. Ld. AR thus submits that all the cash receipts noted in the said diary should only be considered for estimation of income as brokerage on such receipts at the rate prevailing in the market for finance transactions. Before us, Ld. AR filed a table containing gross receipt of funds in cash and its onward application, according to which total cash receipts pertaining to the year under appeal was of INR 21,65,16,666/- and total of cash outgoings for the relevant period was of INR 21,11,94,295/-. Ld. AR submits that since the cash receipts exceeds the payments/outgoing, there was no deficit of funds. Ld. AR further submits that since the diary seized do not contained all the transactions and various entries were missing which has resulted into difference between the amount of receipts written as income and the expenditure which should be ignored and excluded while estimation of income based on the transactions noted in the said diary. Ld. AR submits that assessee’s income is limited to the brokerage income received on the loans solicited therefore, the income and expenditure cannot be treated as separate transactions and integral part of finance activity carried out by the assessee as broker and thus the ld. AR prayed that no addition should be made on this account.

On the other hand, Ld. CIT DR for the Revenue vehemently supported the orders of lower authorities and submits that entries contained in the diary seized during the course of search contained unaccounted transactions carried out by the assessee and therefore, the AO has rightly made the additions separately for the cash transaction of loans & advances by taking the excess of receipt over payments as well as of the unaccounted expenditure u/s 69C of the Act separately. He thus, requested to confirm the orders of the lower authorities.

Heard the contentions of both the parties at length and perused the material available on records. It is an admitted fact that diary found and seized from the possession of the assessee was in his hand writing. Further undisputedly, this diary contained entries related to unaccounted transactions of loans solicitated by the assessee wherein receipt and payments of loans and unaccounted expenditures are noted. The AO invoked section 69A for making addition of excess of receipts over payments. Further, the AO has treated the excess of expenses over income as unexplained expenditure u/s 69C of the Act. It is not in dispute that all the transactions of loans and expenditure are recorded in the same diary and the immediate source of loans advanced and payment of expenditure was out of cash receipts noted int eh same diary, it is incorrect to treating excess of expenditure over income as unexplained expenditure separately. Therefore, we are of the view that the all the receipts and payments should be taken together for computing the income of the assessee. Before us, ld. AR for the assessee filed a detailed working, according to which gross undisclosed receipt in cash as per the diary for the financial year relevant to assessment year under appeal was of INR 21,65,16,666/-and corresponding unaccounted loans advanced / expenditure was of INR 21,11,94,295/- thus, the outgoings in the shape of loans and expenditure are duly backed by the cash receipts and therefore no addition is required to be made as there was no deficit. Accordingly, the addition of Rs. 67,63,629/- made u/s 69C being excess of expenditure over income as unexplained expenditure is hereby deleted.

Now coming to the estimation of income. The claim of the assessee is that he has acted as finance broker and earned brokerage / commission income only from soliciting the loans to the parties. Since the assessee has admitted that he was carrying out business of finance broker providing loans to various parties where he used to receive cash loans which were advanced to other person and name of the both the parties were found noted in the respective ledger accounts maintained in the diary. The assessee has income in the shape of brokerage from soliciting such transactions therefore, a reasonable rate should be applied on such transactions. On careful consideration of the entire facts and peculiar circumstances of the present case, and further following the judgement of Hon’ble Gujarat High Court in the case of CIT Vs The President Industries reported in 258 ITR 654 (Guj.) wherein the hon’ble high court has held that entire receipt cannot be taxed and the profits embedded therein should only be taxed, in our considered opinion, income in the shape of brokerage @ 2% of gross cash receipt of loans would be reasonable and meet the end of justice. Accordingly, we direct the AO to compute the income of the assessee as brokerage @ 2% of gross cash receipt of INR 21,65,16,666/- from the cash transactions found recorded in the diary and remaining addition made is hereby deleted. With these observations, Grounds of appeal Nos. 5 & 6 raised by the assessee are partly allowed.

Since no submission were made in respect of Grounds of appeal No. 7 & 8 raised by the assessee therefore, the same are dismissed.

In the result, appeal of the assessee in ITA No. 5534/Del/2025 for AY 2017-18 is partly allowed.

During the course of hearing, both parties fairly admitted that all the issues in present appeal are common with the issues in assessee’s appeal for AY 2017-18 in ITA No.5534/Del/2025 wherein we have deleted the additions made on account of excess of receipts over payments as well as excess of expenditure over income and estimated the brokerage income of the assessee @ 2% of gross cash receipts found noted in the said diary. Thus, by following the observation made in ITA No. 5534/Del/2025 which are Mutatis Mutandis applied to the facts of this year also, we direct the AO to compute the brokerage income of the assessee @ 2% of cash receipt of INR 24,22,80,850/- and balance addition is hereby, deleted. The grounds of appeal No. 5 & 6 are partly allowed.

Since no submission were made in respect of remaining Grounds of appeal raised by the assessee therefore, the same are dismissed.

With these observations, appeal of the assessee for Ay 2018-19 in ITA No. 5535/Del/2025 is partly allowed.

Ground of appeal Nos. 1 to 4 are with respect to the initiation of proceedings u/s 153A however, no submissions are made, the same are dismissed.

Ground of appeal No.5 with respect to the addition of 6,30,000/- made u/s 69C r.w.s. 115BBE of the Act on account of unexplained expenditure.

Heard the contentions of both the parties at length and perused the material available on records. The AO has made the additions based on the entries found noted in Annexure A_4 seized during the course of search from the possession of the assessee. In the said seized diary, transactions with respect to cash receipt of loans and cash loans given are recorded. The AO observed that for the year under appeal, transactions of payments of INR 6,30,000/- were recorded only and no corresponding receipts were recorded and therefore, made the addition of the said deficit as unexplained expenditure u/s 69C of the Act. Before us, claim of the assessee is that such payments were made out of the undisclosed brokerage income earned in immediately preceding assessment years from soliciting cash loans of which entries of receipts and payments were found noted in the same diary, therefore, no further addition should be made for deficit as unexplained expenditure u/s 69C of the Act.

On careful consideration of the facts and arguments of both the parties, it is observed that in immediately preceding assessment years i.e. in AY 2017-18 and 2018-19, while deciding the appeals of the assessee in ITA Nos. 5534 & 5535/Del/2025 respectively, we estimated the brokerage income on cash transactions found noted in the said diary @ 2% of the total cash receipts as undisclosed income of the assessee earned from such cash transactions. Since the application of the said income has not been found elsewhere therefore, benefit of telescoping of the said income available in the form of cash with assessee should be allowed against the deficit of INR 6,30,000/- held as cash expenditures found noted in the same diary. Accordingly, by allowing the benefit of telescoping and set off, no separate addition is required to be made and thus the addition of INR 6,30,000/- is hereby deleted. The Ground of appeal No. 5 raised by the assessee is allowed.

Ground of appeal Nos.6 & 7 are not pressed hence, dismissed.

In the result, appeal of the assessee for Ay 2019-20in ITA No. 5536/Del/2025 is partly allowed.

Brief facts of the case are that the assessee filed return of income for the year under appeal, declaring total income of INR 27,60,550/- on 12.04.2022. As a result of search carried out u/s 132 of the Act in the case of Manoj Kumar Singh, his associates and other parties, case of the assessee was selected for scrutiny. In the case of the assessee also, a search u/s 132 of the Act was conducted at his business and residential premises. In the assessment order, AO observed that during the course of search, total cash of INR 59,28,700/- was found from the possession of assessee out of which cash of INR 57,00,000/- was seized. With respect to the immediate source of such cash, the assessee claimed that cash of INR 2,07,000/- belonged to his Son, Shri Abhishek Gupta, a sum of INR 9,60,772/- belonged to his wife Smt. Asha Gupta and balance cash of INR 47,72,800/- pertained to himself which is duly recorded in the books of accounts. AO after verifying the returns of income of all the family members of the assessee and further, considering the cash as per books, hold the cash of INR 2,58,500/- as explained and balance cash of INR 56,70,200/- was held as unexplained money of the assessee. Such observations of the AO were supported with the admission of assessee in his statements recorded wherein he has admitted that cash of INR 27,99,00,000/- was received from Shri Manoj Kumar Singh against the sale of industrial plots at 5, 6 & 7, Udyog Vihar owned by M/s Hector Enterprises Ltd., accompany in which assessee is one of the Directors. Besides this, during the course of search, a loose paper containing details of receipt of cash advance of Rs. 2.00 crores on 04.08.2020 issued by Smt. Ruchi Sharma was found marked as Annexure A-1 page 19, which is reproduced at page 12 of the assessment order. As per the said paper it is further stated that a sum of INR 50 Lakhs would be paid in future in cash. As per the said paper, total purchase consideration decided for property the purchased situated at 489, Sector 49, Gurgaon was of INR 9,14,50,000/- out of which INR 2.00 crore was paid as advance in cash. The AO further presumed that cash of INR 50.00 lacs as noted in the said paper was also paid. During the course of search, in the statement recoded u/s 132(4), assessee has admitted that such cash amount of INR 2.50 crores was paid by him out of the cash consideration received from the sale of property owned by M/s Hector Enterprises Ltd. and accordingly the AO treated the sum of Rs. 2.50 crores as unexplained money of the assessee and made the addition u/s 69A r.w.s. 115BBE of the Act. Thereafter the total income of assessee stood computed at INR 3,34,30,750/- by making addition of Rs.56,70,200/- u/s 69A towards cash found during the search and INR 2.50 crores u/s 69A towards unexplained payment made for purchases of property.

Before us, in support of the ground of appeal No. 2, ld. AR for the assessee submits that in preceding assessment years, assessee has requested to uphold the brokerage income from the cash transactions of loans found noted in the diary seized from the possession of assessee. Ld. AR further submits that application of such income elsewhere has not been established except claimed by the assessee of Rs. 6,30,000/- in AY 2019-20, therefore, it could be safely presumed that remaining income in the form of cash was available with the assessee. Ld. AR thus requested to allow the benefit of telescoping and set off of the cash found during the course of search out of said income.

Regarding the addition of INR 2.50 crores made u/s 69A of the Act, towards alleged cash payment for purchases of property at 489, Sector-45, Gurugram, ld. AR submits that the said document was neither signed by the assessee nor signed by the person who was alleged as the recipient of such sum i.e. Smt. Ruchi Sharma. Ld.AR submits that notice issued u/s 131 issued to Smt. Ruchi Sharma remained uncompiled with however no further efforts was made by the AO for verification from land revenue authorities. Ld. AR submits that for making addition u/s 69A, basic condition is that assessee should be found to be the owner jewellery, bullion, money or other valuable article which is not recorded in the books of accounts and the explanation offered, if any, should be to the satisfaction to the AO. Ld.AR submits that in the instant case, the addition was made on the basis of so-called receipt of cash payment found from the possession of assessee cannot be treated as money, bullion, jewellery and other valuable article therefore, provision of section 69A are not applicable. For this, he placed reliance on the following judgements of Hon’ble Supreme Court and Hon’ble High Court:-

Ld. AR further submits that the AO has made the addition solely on the basis of statement of the assessee recorded during the course of search however, such statements were retracted by the assessee and Co-ordinate Bench in the case of Hector Enterprises Pvt. Ltd. in ITA No.1692/Del/2024, in whose case assessee admitted the receipt of cash from sale of property out of which Rs. 2.50 crores were admitted to have been paid to Smt. Ruchi Sharma, it is held by the coordinate bench that such retracted statements cannot be relied without any corroborative material. Ld. AR submits that in the instant case also, the addition is made on the basis of such retracted statements without bringing on record any corroborative material to support the allegation of payment in cash of INR 2.50 crores by the assessee, therefore, he requested for the deletion of the same.

Ld. CIT DR for the Revenue submits that the assessee has failed to substantiate the source of cash found during the course of search from his possession and the AO has specifically pointed out that cash claimed by the assessee as belonged to his family members however, they have not shown cash in hand in their ITR filed therefore, Ld. CIT DR requested for the confirmation of the addition on this account.

Regarding the addition of INR 2.50 crore, Ld. CIT DR submits that during the course of search, one document was found marked as Annexure A-1, page 90 titled as “Advance payment Receipt” for which it was stated by the assessee in his statement recorded u/s 132(4) that it is an advance payment given by the assessee to Ms. Ruchi Sharma for purchase of property at 489, Sector-45, Gurgaon for a total sum of INR 9,14,50,000/- out of which INR 2.00 crore was paid as advance and balance was paid on or before 14.11.2020. In the said paper, it is further stated that INR 7,14,50,000/- is to be paid on or before 14.11.2020 and Rs. 1.00 crore as part on or before 02.09.2020 (50 cheque + 50 cash). The said paper is dated 04.08.2020 and signed by one P. Sharma on behalf of Ruchi Sharma and one Shri Rakesh Garg signed as witness. Ld. CIT DR submits that this paper is duly corroborated by the statement of the assessee recorded during the course of search wherein the assessee has accepted that he had paid the said amount to Smt. Ruchi Sharma out of the cash received from the sale of property owned by M/s Hector Enterprises in which he is one of the Directors. Accordingly, Ld. CIT DR prayed for the confirmation of the addition so made by the AO.

Heard the contentions of both the parties at length and perused the material available on records. With respect to the cash found during the course of search of INR 56,70,200/-, the assessee has not been able to explain the source of such cash and therefore we find no error in the order of the lower authorities in holding the said cash as unexplained money of the assessee u/s 69A of the Act. Regarding the claim of the assessee of allowing the benefit of telescoping and set off from the additions confirmed in preceding assessment years, it is observed that while deciding the appeals of the assessee for AY 2017-18 and 2018-19 in ITA No. 5534& 5535/Del/2025 herein above, we have estimated the brokerage income @ 2% on gross cash receipts found recorded in the diary seized during the course of search from the possession of assessee. The accumulation of the said income in cash with the assessee cannot be denied nor any other asset/expenditure was found as a result of search wherein such cash could be applied, except the deduction of INR 6,30,000/- allowed as set off in AY 2019-20 by us, therefore, we direct the AO to allow the benefit of telescoping of such income against the cash so found in excess during the course of search of Rs. 56,70,200/-. Accordingly no separate addition is required to be made and thus the addition of Rs. 56,70,200/- is hereby deleted.

With respect to the addition of INR 2.50 crores made on account of cash payment as advance against the purchase of property, it is observed that though the paper was found during the course of search from the possession of assessee however, it does not contain the signature of assessee nor of the person to whom alleged cash payment was made as found noted therein. It is further observed that assessee though had accepted the said payment as made out of the cash consideration received from the sale of property by M/s Hector Enterprises Ltd of which assessee is one of the Directors however, these statements were retracted by the assessee and in the case of M/s Hector Enterprises Ltd., the Co-ordinate Bench in ITA No.1692/Del/2024 vide order dated 14.01.2026 has deleted the additions made of account of alleged receipt of on-money of INR 27.99 crores solely based on the statements of the assessee. The relevant observations of the Co-ordinate Bench as contained in para 9 to 12 are as under:-

It is further observed that the AO has made no effort to examine the land revenue loan authorities to find out whether the property referred in the said loose paper was ever purchased by the assessee or not. Further, the payment of INR 50 Lakhs as stated in the said paper paid through cheque has not been verified by the AO, whether the same was paid by the assessee or by some other person nor any effort was made to verify as to who has made the remaining payment of the sales considerations admittedly made through banking channel. Merely, on the basis of so-called retracted statements of the assessee, additions have been made u/s 69A of the Act. Since the statements were retracted they do not have any evidentiary value and could not be made sale basis for making any addition without bringing on record any corroborative material to show that averments made in such statements were true and correct. As observed above, in the case of Hector Enterprises Ltd. (supra), the Co-ordinate Bench already held that these statements could not be relied upon for making addition and further deleted the addition of INR 27.99 crores which were admitted as the source for making payment as found noted in the said loose paper. Further the AO has made no efforts to find out the real owned of the property as the assessee since beginning of the proceedings denied the ownership of the subject property. Once the AO has failed to establish the ownership of the said property as of the assessee, it cannot be presumed that the cash found noted in the loose paper paid as advance cannot be presumed to be paid by the assessee. Therefore, by respectfully following the judgement of Hector Enterprises Ltd. (supra), we find no occasion to make the addition of INR 2.50 crore in the hands of the assessee as unexplained money.

At this juncture, we further note that the addition has been made u/s 69A as unexplained money whereas section 69A is applicable in the case where the assessee is found to be the owner of money, bullion, jewellery and other valuable article or thing which is not recorded in the books of accounts and assessee has not been able to justify the source thereof. In the instant case, what material is available with the AO is so-called advance payments receipt found from the possession of assessee which could be treated as money, bullion, jewellery or valuable article or thing. The Hon’ble Supreme Court in the case of D.N Singh vs CIT, Central [2023] 150 taxmann.com 301 (SC) has held that “section 69A cannot be applied by merely having any legal ownership”. The Hon’ble Rajasthan High Court in the case of Mangi Lal Agarwal vs ACIT (supra) has held

In view of above discussions, the addition of INR 2.50 crores made as unexplained money u/s 69A of the Act is hereby deleted. Ground of appeal No.2 raised by the assessee is allowed.

Since no submissions were filed with respect to Ground of appeal Nos. 3 to 5, the same is hereby, dismissed.

In the result, appeal of the assessee in ITA No. 5537/Del/2025 for Ay 2021-22 is partly allowed.

In the final result, all appeals of the assessee in ITA Nos. 5533 to 5537/Del/2025 for Assessment Years 2016-17 to 2019-20 and 2021-22 respectively, are partly allowed.