ITAT Pune Sets Aside CIT(A) Order Deleting ₹6,05,31,261 Addition Under Section 69 — Remands Matter for Fresh Examination of Cash Payment Source
Case Background
DCIT Vs Navin Hanumanprasad Bagadiya (ITAT Pune)
Assessment Year: 2014-15
Sections Involved: Section 69, Section 115BBE, Section 132, Section 143(3), Section 153C, Section 250(6) of the Income-tax Act, 1961
The Income Tax Appellate Tribunal, Pune, was called upon to adjudicate a Revenue appeal arising from the deletion of a substantial addition made under Section 69 of the Income-tax Act, 1961. The addition in question amounted to ₹6,05,31,261, which had been made by the Assessing Officer in proceedings under Section 143(3) read with Section 153C of the Act, and subsequently deleted by the Commissioner of Income Tax (Appeals), Pune-12, vide order dated 20.03.2024.
Facts of the Case
Search and Seizure Operations
A search and seizure operation under Section 132 of the Income-tax Act, 1961 was carried out on 21 January 2020 in the premises of the Pride Group, covering locations at Aurangabad, Pune, and Kolkata. During this operation, certain documents — specifically small pocket diaries containing handwritten cash transaction entries — were seized. These diaries, maintained in a date-wise format resembling a cash book for unaccounted receipts and payments, contained records of cash transactions involving numerous individuals and entities.
The Head Accountant of the Manjeet Disha Group confirmed that the seized pocket diaries belonged to their group. Additionally, Shri Devanand Narayan Kotgire (hereinafter referred to as "DNK"), the key person of the Manjeet Disha Group, acknowledged ownership of these diaries during post-search enquiries and in statements recorded by the department.
Issuance of Section 153C Notice to the Assessee
Based on the information contained in the seized material pertaining to the assessee, a satisfaction note was recorded and a notice under Section 153C of the Act was issued to the assessee on 30.06.2021. In compliance, the assessee filed a return of income on 24.09.2021 declaring income at ₹47,77,590/-.
Nature of Transactions Recorded in Diaries
The pocket diaries recorded cash receipts and payments between DNK and the assessee spanning Financial Years 2010-11 to 2018-19. The transaction details, as extracted in the assessment order, were as follows:
| FY | Receipts (₹) | Payments (₹) |
|---|---|---|
| 2010-11 | 1,84,78,000 | 1,26,20,000 |
| 2011-12 | 4,37,26,275 | 1,54,41,484 |
| 2012-13 | 2,85,23,500 | 30,24,000 |
| 2013-14 | 22,38,970 | 13,50,000 |
| 2014-15 | 92,59,000 | 86,46,506 |
| 2015-16 | 39,17,100 | 1,09,05,000 |
| 2016-17 | 5,00,000 | 64,00,000 |
| 2018-19 | 3,00,000 | — |
| Total | 10,69,42,845 | 5,83,86,990 |
Peak Theory Working Applied by the Assessing Officer
The Assessing Officer applied the peak theory to compute the cumulative net cash payment made by the assessee to DNK, as follows:
| FY | Cash Receipts from DNK (₹) | Cash Payments to DNK (₹) | Year-wise Diff (₹) | Cumulative Diff (₹) | Dr/Cr |
|---|---|---|---|---|---|
| 2010-11 | 1,26,20,000 | 1,84,78,000 | (58,58,000) | (58,58,000) | Dr |
| 2011-12 | 1,54,41,484 | 4,37,26,275 | (2,82,84,791) | (3,41,42,791) | Dr |
| 2012-13 | 30,24,000 | 2,85,23,500 | (2,54,99,500) | (5,96,42,291) | Dr |
| 2013-14 | 13,50,000 | 22,38,970 | (8,88,970) | (6,05,31,261) | Dr |
| 2014-15 | 86,46,506 | 92,59,000 | (6,12,494) | (6,11,43,755) | Dr |
| 2015-16 | 1,09,05,000 | 39,17,100 | 69,87,900 | (5,41,55,855) | Dr |
| 2016-17 | 64,00,000 | 5,00,000 | 59,00,000 | (4,82,55,855) | Dr |
| 2018-19 | — | 3,00,000 | (3,00,000) | (4,85,55,855) | Dr |
Based on the above working, the Assessing Officer concluded that the cumulative net cash payment made by the assessee to DNK as on Financial Year 2013-14 (relevant to Assessment Year 2014-15) stood at ₹6,05,31,261/-. This amount was treated as unexplained investment and added to the assessee's income under Section 69 read with Section 115BBE of the Act. Total income was assessed at ₹6,53,28,451/-.