M/s Shagun Jewellers (P) Ltd vs. Dy. CIT
- Appeal Numbers: ITA Nos. 3165, 3166 & 3167/Del/2023
- Assessment Years: 2009–10, 2011–12 & 2012–13
- Members: Shri Anubhav Sharma, Judicial Member & Shri Manish Agarwal, Accountant Member
- Date of Pronouncement: 27 February 2025
- Bench: Delhi ITAT – G Bench
Context & Background:
In a set of reassessment cases completed under Section 147/143(3) of the Income Tax Act, the assessee was subjected to additions toward interest payments allegedly made on unexplained cash loans received through an accommodation entry operator.
The Revenue had relied on the statement of a third party and claimed the interest payments were in connection with bogus cash transactions, leading to disallowance under Section 69C.
Key Dispute:
Whether the interest payments allegedly made on cash loans could be treated as unexplained expenditure merely on the basis of third-party statements, without direct corroborative evidence.
Assessee’s Stand:
The assessee’s counsel:
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Did not press the reopening-related grounds, and
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Focused solely on the merit of the interest disallowance.
It was argued that:
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A similar disallowance was already deleted by the ITAT in the assessee’s own case for AY 2010–11 (ITA No. 9890/Del/2019).
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The Revenue relied entirely on the statement of one person, while the person allegedly providing the cash loan (Shri Sant Lal Aggarwal) had categorically denied any such transaction or involvement.
What ITAT Had Held Earlier (AY 2010–11):
The Delhi ITAT had ruled that:
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The entire addition was based on conjecture and the statement of a third party (Devi Das Tikamdas Chattani).
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The alleged lender, Shri Sant Lal Aggarwal, had denied knowledge of any cash loan dealings or the third party in question.
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The AO failed to bring any independent evidence or confront both parties.
Quoting from the 2020 order:
“There is no direct evidence brought on record to suggest that some cash transactions took place… The entire addition has been made on surmises and conjectures.”
Current Ruling:
In the present appeals, the Tribunal noted:
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The facts, pattern, and parties involved are identical to the earlier year.
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Since the same type of addition was deleted in AY 2010–11 on similar grounds, the same reasoning applies here.
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The Tribunal, therefore, deleted the disallowance of interest for AYs 2009–10, 2011–12, and 2012–13.
Final Decision:
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The Tribunal deleted all additions toward interest disallowance in all three years.
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The appeals were partly allowed (as reopening grounds were not pressed).
Key Takeaways:
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No Addition Without Direct Evidence:
Statements of third parties without corroboration cannot be the sole basis for making high-value additions under Section 69C. -
Consistency in Judicial Interpretation:
The ITAT applied its own previous judgment involving identical facts to maintain judicial consistency. -
AO Must Do More Than Assume:
Observations like “It cannot be ruled out…” or “The seized material indicates…” do not meet the threshold for sustainable additions.
Conclusion:
This case reaffirms a critical principle in tax law: evidentiary value cannot rest on assumptions or third-party statements. For additions to stand the test of law, concrete, corroborated material must be brought on record by the Revenue. In the absence of such evidence, taxpayer relief is inevitable.
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