TaxTMI 
TaxTMI 
2026 (3) TMI 52
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.... the Income Tax Act, 1961 (in short 'The Act') of the cash payment paid allegedly by the assessee for purchasing goods from M/s. Proform Interiors Private Limited were confirmed. 3. The brief facts as culled out from the proceedings before the authorities below are that M/s. Proform Interiors Private Limited and its related entities, which are primarily engaged in the business of interior designing and furnishing. The search and seizure operation, under section 132 of the Act was conducted on 9th Feb, 2022 in the case of M/s. Proform Interiors Private Limited as well as the residential premises of its key person, Mr. Gaurav Chopra. In the post-search inquiry it was revealed that the Proform Group was involved in part payments and receipts in cash from its clients, which were not recorded in the books of accounts of the searched entities. The income generated through such unaccounted transactions was not disclosed for taxation. During the course of assessment proceedings, it was ascertained that M/s. Nimbus Projects Ltd. was a client of the Proform Group, having availed interior designing and furnishing services from them. Further, it was discovered that M/s. Nimbus Projects Ltd.....
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....t is the case of the Revenue that the assessee has made substantial cash payment amounting to Rs. 45,00,000/- to M/s. Proform Interiors Pvt. Ltd. i.e. Rs. 40,00,000/- on 24th December, 2014 and Rs. 5,00,000/- on 19th January, 2015. For these years also, after receiving notice under section 148 of the Act dated 30.03.2024, the assessee did not file the return but has filed responses to the notices issued as mentioned in para 4 in tabulation Form. Again they have taken stand that they did not enter into any transaction with proform interior Pvt. Ltd. during the year under consideration and has accepted that the transaction has taken place only in the previous year relevant to A.Ys. 2017-18 and 2018-19. The AO was not convinced by those submissions and by relying on the document recovered during the search, has made addition of Rs. 45,00,000/- under section 69 of the Act. 6. With respect to the ITA No. 5015/Del/2025, A.Y. 2017-18, the assessee is alleged to have made a payment of Rs. 2,00,000/- in cash on 6th June, 2016. In that regard, in reply of various notices issued during the reopening assessment, the assessee has taken stand that the paper seized during the search on Proform....
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....sment orders in all the year under consideration, in these appeals, the assessee filed appeal before the Ld. CIT(A) who has disposed of all appeals for 4 years from 2015-16 to 2018-19 by common order dated 01.08.2025. 8. Before the Ld. CIT(A), the Ld. AR of the assessee/the appellant has argued that the reopening was bad in law without jurisdiction as there is no information available with the Assessing Officer arising out of search carried out on Proform Interiors Pvt. Ltd.; that the approval under section 151 of the Act is also bad in law because the approval was granted in the mechanical manner without application of mind; that the approval granted under section 148B of the Act by ACIT(A) was also mechanical without application of mind. It was further argued that there was no question of proving source of cash paid because the appellant has been denying payment of cash to Proform Interiors Pvt. Ltd. With regard to the seized document on the basis of which assessment was reopened, it is stated that there is no signature appended of the appellants on the alleged seized document and it is nowhere related to the assessee and therefore the seized document cannot be considered as a....
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....sessing Officer arising out of search carried out on Proform Interiors Private Limited which suggests that income chargeable to tax has escaped assessment and therefore, the notice issued under section 148 is bad in law and hence, the consequent assessment order needs to be quashed. The appellants further, contend that on the facts and in the circumstances of the case and in law, the Assessing Officer failed to bring on record as to how is the income, which has allegedly escaped assessment, represented in the form of (i) an asset; or (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, and therefore, the notice issued under section 148 is bad in law and hence, the consequent assessment order needs to be quashed. 1. The specified authority under section 151 erred in not granting an appropriate approval as required under section 151 of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the approval granted by the authority under section 151 of the Act is mechanical and without application of mind, and therefore, the notice is....
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....rched entity. It is further argued that the reply given by the assessee to the notice u/s 133(6) of the Act, dated 24.06.2025 submitted before the Ld. CIT(A), has not been properly considered by the Ld. Appellate Authority. It is further submitted that the impugned order and the seized document also relate to transactions pertaining to Nimbus Propmart Limited and the said entity has duly explained to the Ld. CIT(A) stating that they (Nimbus Propmart Ltd.) have paid Rs. 16,00,000/- to perform interiors during the year under consideration. Hence, the assessee was entitled to relief of Rs. 16,00,000/- from the addition, in view of submissions of Nimbus Propmart Ltd. It is further argued that in page 12 of the ld. CIT(A) order, the Ld. CIT(A) has restricted the addition for assessment year 2017-18 only to Rs. 2,00,000/- as against the addition of Rs. 62,00,000/- by the AO which shows that the addition made by the Assessing Officer in other preceding years was also not legally justified, as the same has been based on a dumb document which cannot be relied upon as evidence. It is further argued that the department has not challenged the restriction of the addition only to Rs. 2,00,000/- ....
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....f Hon'ble Supreme Court in Common Cause (A Registered Society) v. Union of India (supra) wherein it was held that "loose sheets of paper are wholly irrelevant as evidence, being not admissible u/s 34, so as to constitute evidence with respect to the transaction mentioned therein being of no evidentiary value". The entire prosecution based on such entries, which led to the investigation was quashed by the Hon'ble Supreme Court. It is therefore argued by the Ld. AR that the seized document relied by the revenue is not admissible as evidence, as it is a document prepared by a 3rd party having no concern with the assessee. 16. The Ld. DR on the other hand argued that under the Income Tax Act, the burden of proof is not beyond reasonable doubt as in a criminal case, hence, the case relied by the assessee is not relevant because under the income Tax Act the adjudicating authorities are required to consider the material/documents on the basis of preponderance of probabilities and has relied the case of the Hon'ble Supreme Court in Sumati Dayal vs Commissioner Of Income-Tax, Bangalore 1995 AIR 2109, wherein para 5 it was held as under: "5. It is no doubt true that in all cases ....
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.... or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income Tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, in our considered view the methodology adopted by the department cannot be faulted." 18. We now proceed to examine the assessment order as well as impugned order to consider the above submissions and the reliability of the seized document. We are extracting para 5, 5.1 and 5.2 as under: "As per the assessee's submission, it has been explicitly stated that no transactions were conducted with Proform Interiors during the year under consideration. However, a document seized during the search operation serves as concrete evidence that the assessee made cash payments to this entity during the relevant financial year. 5.1 This contradiction suggests that the a....
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....nd as per the bank account of the appellant and reply of Nimbus Propmart Limited. Apart from the cheque transactions, there is cash payment of Rs. 40 lacs during AY 2015-16 Rs. 20 lacs during AY 2016-17 and Rs. 2 lacs during AY 2017-18. The assessee has denied the payment of cash. It is important to emphasize here that the cash transactions are also mentioned on the same document where the cheque transactions are mentioned. It cannot be a case where the part of the document can be considered as true and other part false as per the convenience of the assessee. Once, the cheque transactions recorded in the seized document match with the entries recorded in the books of accounts of the assessee, the onus shifts to the assessee to explain the source of cash payments as well. The AO has relied upon the seized material wherein, the payment of cash totaling to Rs. 62 lacs made by the assessee spread over three assessment years i.e. AY 2015-16 to AY 2017-18 has been referred to. The AO treated the cash payment as unexplained cash and added the same to the total income of the assessee, Though the Alt has been denying the payment of cash, but the same seized document carrie....
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....our of revenue] The Hon'ble High Court of Jharkhand in the case of Mahabir Prasad Rungta vs. Commissioner of Income-tax (Appeals), Ranchi reported at [2014] 43 taxmann.com 328 (Jharkhand), held as under: Pursuant to a search of assessee's premises, Assessing Officer made an addition on ground of undisclosed Income on basis of loose sheets seized during search Whether loose sheets seized during search sometimes contain valuable information and thus those are to be regarded as ' documents' within meaning of section 158B(b)-Held, yes Whether there is presumption raised under section 132(4A) regarding documents seized and in light of such presumption, assessee ought to have produced other documents to disprove entries made in loose sheets Held, yes Whether since assessee had not adduced any rebuttal evidence to show that entries made in diary/loose sheets were not income in hands of assessee, addition upheld by Commissioner (Appeals) and Tribunal were justified-Held, yes" From the above judgments, it is clear that once there is adequate documentary proof available showing the payment of cash, the said unaccounted cash needs to be brought to ta....
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....osed by us in para 14 (supra) is decided accordingly in favour of revenue. Therefore, we find no legal or factual infirmity in the conclusion arrived by the Ld. Lower Authorities including the Ld. CIT(A) in the impugned order. Hence, we confirm the impugned order and the addition made therein in all the concerned assessment years. 21. Since, the appellant has argued its case with respect to the addition, on merit only, the other grounds raised in the appeal are disposed of as not pressed. The appeal of the assessee is accordingly dismissed. ITA No. 5013/Del/2025, A.Y. 2015-16 & ITA No. 5015/Del/2025, A.Y. 2017-18 22. In view of the finding returned in ITA No. 5013/Del/2025 & 5015/Del/2025 since, the facts and issues are identical and the notices is issued on same date, the findings returned in ITA No. 5014/Del/2025, (A.Y. 2016-17) shall mutatis mutandis apply to these appeals also. The appeals of the assessee are dismissed in above terms. Order pronounced in open Court on 09 January, 2026. ============= Document 1 Statement - 1 Relevant Per bank statements of the appellanta refer pg no of paper books Per selzed document A.Y. Payment Received Amou....