TaxTMI 
TaxTMI 
2026 (6) TMI 496
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....er section 132(1) of the Act on 28.07.2016 at various premises of the Chandra Prakash Agarwal Group, wherein, the assessee was also covered. Subsequent to the search, the assessment of the assessee for the impugned years was framed under section 143(3) read with section 153A of the Act on 14.12.2018. During the course of the assessment proceedings for the assessment year 2015-16, the Assessing Officer observed that the assessee had accepted loans in cash of Rs. 20,00,00,000 from Shri Chandra Prakash Agarwal and paid interest thereon of Rs.87,84,862/-. The AO further observed that the assessee had accepted cash loans Rs. 3,61,24,000 from Shri Chandra Mohan Badaya, and had made re-payment of loan of Rs.2,28,87,000/- along with interest of Rs.51,11,569/- The AO held the said interest expenditure in respect of loans from both the parties was from unexplained sources and made the addition of Rs.87,84,862/- and Rs.51,11,569/- respectively as unexplained expenditure under Section 69C of the Act into the income of the assessee. For the assessment year 2016-17, the AO observed that the assessee had accepted cash loans of Rs. 31,90,00,000/- from Shri Chandra Prakash Agarwal and paid interest....
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....e AO neither supplied the alleged seized documents nor gave any opportunity to the assessee to cross examine the aforesaid persons from whom the alleged documents were seized stating that the seized documents were self-speaking and part of assessment records and that providing cross-examination was unnecessary, thereby proceeded to confirm the impugned penalties. 4.1. The Ld. Counsel for the assessee further brought to our attention that the foundation of these penalty proceedings has already been demolished by the Co-ordinate Bench of this Tribunal in the assessee's own quantum appeals in ITA Nos. 1463 to 1465/JP/2024, vide order dated 20.05.2025. The relevant part of the order of the Tribunal (supra) is reproduced hereunder: "13. Vide ground no. 4 the assessee challenges addition of Rs. 87,84,862/- in the hands of the assessee being the amount of alleged unexplained expenditure in the form of interest expenditure to Shri Chandra Prakash Agarwal on the alleged loan of Rs. 20 cr. The brief facts related to the dispute are that in the search operation at residential cum business premises of Shri Chandra Prakash Agarwal, [third party] at 1756, Telipada, SMS H....
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....ased on these records what was the questions were raised from where these records were found and what was explanation furnished. The bench also noted that even these page were not confronted with the assessee during the search or post search proceeding. In the absence of that finding making addition only of the interest alleged to have been paid by the assessee cannot be held as unexplained expenditure in the hands of the assessee. Alternatively, even if these loans were routed with the assessee there is no finding that the loans and interest there upon were re-paid by the assessee from his undisclosed source. Thus, when there is no evidence as to where this investment was made and how that was repaid merely making the addition of interest there is merely a guess work and any addition cannot be made merely on the guess work. While making the assessment of income of the assessee there must be something more than bare suspicion to support the assessment which is clearly missing at the stage of the ld. AO and that of with the ld. CIT(A). While dealing with the appeal against the written submission so filed by the assessee, ld. AO through ld. DR did not controvert the facts placed on r....
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....ronted to the assessee during the search or post-search proceedings, and the assessee was unjustly denied the opportunity to cross-examine the third parties. Consequently, the Tribunal held that making additions purely on the basis of such third-party documents without corroborative evidence amounted to mere guesswork and bare suspicion, thereby deleting the entire interest additions made under section 69C of the Act. 6. The Ld. DR, however, has relied upon the findings of the lower authorities. 7. We have considered the rival submissions and have also gone through the findings of the Tribunal given in appeal pertaining to the quantum additions, as reproduced above. It is a well-settled proposition of law that penalty proceedings are separate proceedings from the assessment order and since the same are sort of penal in nature, the initial burden lies strictly on the Revenue to conclusively establish that the assessee has actually accepted or repaid a loan or deposit in contravention of sections 269SS and 269T of the Act. The impugned penalties have been levied by the AO, solely on the assumption that the transactions recorded in the seized documents from third parties represe....