ITAT Pune Sets Aside CIT(A) Order Deleting ₹6,05,31,261 Addition Under Section 69 — Matter Restored for Fresh Adjudication
Case Details
Case Name: DCIT Vs Navin Hanumanprasad Bagadiya (ITAT Pune)
Assessment Year: 2014-15
Relevant Provisions: Section 69, Section 115BBE, Section 132, Section 143(3), Section 153C, Section 250(6) of the Income-tax Act, 1961
Background and Context
This matter arose from a search and seizure operation conducted under Section 132 of the Income-tax Act, 1961 on 21 January 2020, targeting the Pride Group of Aurangabad, Pune, and Kolkata. During the course of this search, certain documents were seized — notably, small handwritten pocket diaries that contained a detailed record of unaccounted cash transactions spanning multiple financial years.
The seized diaries were attributed to the Manjeet Disha Group and were accepted as belonging to that group by its Head Accountant. Mr. Devanand Narayan Kotgire (referred to hereinafter as "DNK"), the principal figure of the group, also acknowledged ownership of these diaries in post-search statements. The pocket diaries recorded date-wise cash receipts and payments between DNK and the assessee — Navin Hanumanprasad Bagadiya — covering the period from F.Y. 2010-11 through F.Y. 2018-19.
Following issuance of a satisfaction notice under Section 153C on 30.06.2021, the assessee filed a return of income on 24.09.2021 declaring income of ₹47,77,590/-. Valid notices under Section 143(2) and Section 142(1) were duly issued, and the assessment was subsequently completed.
Addition Made by the Assessing Officer
Based on the data extracted from the seized diaries, the Assessing Officer carried out a year-wise analysis of cash receipts from DNK and cash payments made to DNK by the assessee. The cumulative working, as per the peak theory applied in the assessment order, is reproduced below:
| F.Y. | Cash Receipts from DNK | Cash Payments to DNK | Year-wise Difference | Cumulative Difference | 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 |
The Assessing Officer concluded that the cumulative debit balance of ₹6,05,31,261/- as at the end of F.Y. 2013-14 represented net unexplained cash payments made by the assessee to DNK. Invoking Section 69 read with Section 115BBE of the Act, the Assessing Officer brought this entire amount to tax as unexplained investment. The total income of the assessee was assessed at ₹6,53,28,451/-.
Additionally, a minor addition of ₹9,600/- was made on account of a discrepancy between the salary income declared in the return and the income reflected in Form No. 26AS.
Proceedings Before the Commissioner of Income Tax (Appeals)
Assessee's Contentions Before CIT(A)
The assessee appealed before the Commissioner of Income Tax (Appeals), Pune-12. The following primary contentions were advanced:
- The transactions reflected in the pocket diaries were commercial in nature and did not constitute loans or advances.
- DNK had voluntarily acknowledged all entries in the seized diaries as belonging to him and had offered income thereon for taxation.
- The Addl. CIT (Central), Nashik had dropped penalty proceedings under
Section 271DandSection 271E, which further corroborated the assessee's position that these were genuine business dealings. - No documents or notings relating to the Disha Group were found at the assessee's own premises during the search.
- Since all transactions had been accepted and taxed in DNK's hands, any further addition in the assessee's case would constitute double taxation.
- The addition was also assailed on the ground that extending the cumulative difference across earlier assessment years (F.Y. 2010-11 to F.Y. 2012-13) and treating it as income in A.Y. 2014-15 was not in accordance with law.
The assessee further relied upon two affidavits executed by DNK — one before the Ld. ACIT, Circle-1, Aurangabad on 29.09.2021, and another before the Addl./JCIT, Nashik on 10.05.2022 — wherein DNK categorically declared: