The Calcutta High Court has upheld the deletion of a ₹11.35 crore addition under Section 69A of the Income Tax Act, 1961, finding that the alleged unaccounted cash loans and interest income were not supported by adequate corroborative evidence.
The Bench of Justice Rajarshi Bharadwaj and Justice Sudip Deb has observed that the Tribunal had examined the evidence and reached findings of fact that disclosed neither irregularity nor perversity. Consequently, the department’s challenge did not raise any substantial question of law.
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The dispute arose from a search conducted on November 30, 2018, in connection with the Citizen Group, of which the assessee was a key person. He also operated two proprietorship concerns.
During the search, the authorities seized documents from premises associated with Uma Shanker Kasera, his son Anil Kumar Kasera, and Jai Bhagawan Sanwaria. According to the Revenue, these documents contained details of unaccounted cash loan transactions connected with the assessee.
A survey under Section 133A was subsequently conducted against the Citizen Group on February 19, 2020. Documents were impounded from the assessee and Citizen Umbrella Manufacturers Ltd., and a statement of the assessee was recorded.
For assessment year 2020–2021, the assessee filed his return on February 1, 2021, declaring a total income of ₹1,74,57,470. The case was selected for compulsory scrutiny, and statutory notices were issued.
The Assessing Officer relied on the seized and impounded documents, together with the assessee’s statement, to conclude that he had advanced cash loans outside his books and earned interest on those transactions.
By an assessment order dated March 26, 2022, the officer added ₹3,01,59,831 towards alleged unexplained money used for advancing cash loans and ₹4,46,38,775 towards alleged interest earned from those loans. Both amounts were added under Section 69A.
The aggregate addition was ₹7,47,98,606, and the total income was assessed at ₹9,22,56,080.
On appeal, the Commissioner of Income Tax (Appeals)-27, Kolkata enhanced the addition to ₹11.35 crore by an order dated April 6, 2025. The appellate authority relied on certain impounded records to determine what it considered the highest peak credit on a single day.
The enhancement amounted to ₹3,87,01,394. Separate penalty proceedings under Section 271AAC were also initiated in connection with the enhancement.
The assessee challenged this decision before the Kolkata “D” Bench of the Tribunal, which set aside the Commissioner’s order and directed deletion of the addition on September 18, 2025.
Examining the Tribunal’s reasoning, the High Court noted that the search on Kasera and Sanwaria had taken place on November 30, 2018—before the beginning of the financial year relevant to assessment year 2020–2021.
The Tribunal had found that the material recovered in that search did not relate to the assessee’s income assessment for the year under consideration.
The court also noted the Tribunal’s finding that the Assessing Officer had failed to bring substantive material on record to corroborate the entries in the seized documents.
The assessee retracted his survey statement through an affidavit filed on February 24, 2020, within five days of the survey. He alleged that the statement had been obtained under coercion and that no corroborative evidence had been found during the survey.
In the retraction, he further maintained that the entries in the impounded documents were either irrelevant or formed part of his regular books of account.
The High Court considered this retraction alongside the Tribunal’s findings about the absence of supporting evidence. Its decision rested on the overall evidentiary record, including the lack of material establishing the alleged cash lending and interest income.
The Tribunal had identified gaps in the investigation. Although Gajraj Choraria and Pawan Mundhhra were named in connection with the alleged cash loan transactions, their statements were not recorded and no summons were issued to them.
This was despite their phone numbers and addresses having been supplied to the survey team and the Assessing Officer.
The Tribunal also found that the impounded documents did not establish any investment by the assessee. Apart from the statement and jottings in the papers, there was no corroborative material showing that he had advanced the alleged cash loans.
The assessment referred to money allegedly received and reinvested through a person named Satish, but did not explain where that money had originated.
The High Court agreed with the Tribunal’s conclusion that the unsupported entries could not justify an adverse inference against the assessee.
The High Court explained that income tax proceedings are not governed by the strict technical rules of evidence. Nevertheless, tax authorities remain guided by the underlying principles of evidence and natural justice.
Referring to Dhakeswari Cotton Mills Ltd. v. Commissioner of Income Tax, the bench reiterated that an assessing authority’s freedom from technical evidentiary rules does not permit an assessment based on pure guesswork without supporting material.
It also relied on Omar Salay Mohamed Sait v. Commissioner of Income-tax to emphasise that factual conclusions must follow a careful consideration of the evidence and cannot rest on suspicion, conjecture or surmise.
Citing Chuharmal v. Commissioner of Income Tax, the court observed that general principles embodied in evidence law may still be invoked in tax proceedings where the facts justify their application.
The bench held that the Tribunal, as the final fact-finding authority, had correctly considered the evidence and documentary material before directing deletion of the addition.
It rejected the department’s contention that the Tribunal’s findings were perverse or that it had failed to consider the merits. The questions proposed by the department were, the court held, questions of fact rather than substantial questions of law.
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