Section 69A Addition Cannot Survive Merely on Ground That Explanation Was an Afterthought: ITAT Delhi

Rakesh Aggarwal Vs DCIT (ITAT Delhi)

ITAT Deletes Addition on Alleged Bonus Income Due to Absence of Accrual or Receipt; Search-Based Addition Quashed as No Evidence Proved Legal Right to Receive Commission Income; ITAT Grants Relief on Seized Cash After Accepting Evidence Supporting Land Purchase Transactions; ITAT Holds Hypothetical Bonus Calculations Not Taxable Without Evidence of Actual Accrual.

The Income Tax Appellate Tribunal (ITAT), Delhi decided cross appeals filed by the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals)-23, Delhi relating to Assessment Year 2021-22. The dispute arose from additions made during assessment proceedings following a search and seizure operation conducted on the Dalmia Landmark Group on 17.03.2021, during which the residential premises of the assessee were also covered under Section 132 of the Income-tax Act.

The assessee had filed a return declaring income of Rs.1,37,84,080/-. However, the Assessing Officer completed assessment under Section 143(3) on 31.03.2023 assessing total income at Rs.6,34,84,080/-. Additions of Rs.3,17,00,000/- and Rs.1,80,00,000/- were made under Section 69A of the Act.

The addition of Rs.3.17 crore related to alleged bonus and commission income. During the search, certain sheets titled “Aexited” and “B. Exited & Remitted Offshore” were seized from the assessee’s residence. According to the Assessing Officer, these sheets reflected workings of interest and commission receivable by the assessee from various entities connected with the Dalmia Group. The Assessing Officer concluded that the assessee was entitled to receive bonus and commission apart from salary and treated the amount as taxable income on due basis.

The assessee explained that the seized sheets were merely personal calculations prepared in anticipation of separation from employment in December 2020 and represented estimated future earnings under certain scenarios. It was also submitted that no actual inflow of funds had occurred and that the statement recorded under Section 132(4) had later been retracted through an affidavit.

The Commissioner (Appeals) deleted the addition observing that the amount of Rs.3.17 crore had neither been received nor accrued to the assessee. It was also noted that the employer had not recorded any provision or payment of the alleged amount in its books of account.

The Tribunal upheld the deletion. It observed that the Assessing Officer himself had accepted that the amount was never received by the assessee. The Tribunal further noted that no evidence existed showing payment or receipt of Rs.3.17 crore, nor was there any proof that the employer had booked the amount as expenditure. The Tribunal held that there was no evidence that the assessee had acquired any legal right to receive the amount and therefore the addition did not represent real income. Accordingly, the Revenue’s grounds challenging deletion of the addition were rejected.

The second dispute related to unexplained cash of Rs.1.80 crore found during the search. Cash amounting to Rs.1,82,01,300/- was found at the assessee’s residence, out of which Rs.1.80 crore was treated as unexplained.

The assessee later explained that Rs.85 lakh belonged to three persons namely Tansir Ahmed, Mushir Ahmed and Saghir Ahmed, who had entrusted the money to him for identifying and negotiating agricultural land purchases on their behalf. The assessee also claimed that Rs.42.50 lakh represented agricultural produce sale proceeds, of which Rs.18 lakh was his declared profit and the balance was payable to farmers. Further explanations were given regarding family savings and cash gifts received during the marriage of the assessee’s daughter and birth ceremonies of the granddaughter.

The Commissioner (Appeals) partly accepted the explanation and granted relief of Rs.23 lakh, comprising Rs.18 lakh disclosed in the return under Section 44AD and Rs.5 lakh towards family savings. However, relief relating to Rs.85 lakh claimed to belong to the three brothers was denied on the ground that the availability of such cash remained unproved and the explanation appeared to be an afterthought.

FULL TEXT OF THE ORDER OF ITAT DELHI

These cross appeals preferred by the Assessee and the revenue against the common order of the Ld. Commissioner of Income-tax-23, Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the order of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 143(3) of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under:

2. A search and seizure action was carried out on Dalmia Landmark Group on 17.03.2021 and the residential premises of the appellant was also covered u/s 132 of the Act. The return of the assessee was filed on 30.03.2022 on income of Rs.1,37,84,080/- and subsequently assessment order u/s 143(3) of the Act has been passed on 31.03.2023 assessing total income of the assessee at Rs.6,34,84,080/- wherein addition of Rs.3,17,00,000/- has been made on account of alleged bonus and interest income u/s 69A of the Act and an addition of Rs.1,80,00,000/- u/s 69A on account of unexplained money.

3. The allegation with regard to addition of Rs.3,17,00,000/- u/s 69A of the Act is that during the search sheet named “Aexited” was seized as page 14 of Annexure A-1 from the residence of assessee and this sheet allegedly had noting of a working of interest received from different entities of Dalmia Group. Another sheet named “B. Exited & Remitted Offshore” was seized as page 13 of the Annexure Al.Allegedly, the assessing officer concluded that this sheet contains details of investment in entities arranged by Shri Rakesh Aggarwal for the clients of Dalmia family, hence, he was to receive commission/bonus on these transactions. Allegedly, the rates of commissions were confirmed by Rakesh Aggarwal in his statement u/s 132 of the Act. Assessing Officer concluded that Shri Rakesh Aggarwal was receiving bonus apart from salary which remained unaccounted as per ITR filed.

3.1 Assessee submitted that these workings are merely some sort of calculations done by the assessee where assessee would extrapolate as to what could be his earnings in certain scenario and there was no inflow of funds on that count. He submitted that he had left Dalmia trust in December, 2020 and had prepared sheets in November, 2020 in anticipation of separation from the organization, what would be his financial affairs.As far as statement recorded u/s 132(4) was concerned he stated that same was retracted and an affidavit for the same has been submitted earlier.

3.2 However, assessing officer was not satisfied and with the following findings had made addition:

“The reply of the Assessee has been perused and is not found acceptable because the sheet is very clear that Rs 3.17 crore bonus/commission is due to him from his employer. In case of salaried employee, the act is very clear and salary and it’s components are taxable on due basis. The employee-employer relationship between Assessee and Dalmia group is not in doubt. Hence the assertion by assessee that it was just wishful thinking is nothing but an afterthought and needs to be rejected. Accordingly, the amount of Rs 3.17 crore is added to the income of Assessee on this count.”

3.3 The same has been deleted by ld. CIT(A) by following findings;

“6.1 The appellant was thinking to resign from his job with his employer Dalmia Family Office Trust, he made a working on his own, as to how much amount would become due to him on conclusion of the on-going deals and arrived at the figure of Rs.3, 17,00,000/-. It is seen that even according to the AO, the amount of Rs. 3,17,00,000/- was not received by the appellant in the year under consideration. Therefore, the only aspect which remained to be examined is as to whether the amount of Rs. 3,17,00,000/- becomes taxable in the hands of the appellant on due basis for the year under consideration. Undoubtedly the appellant was an employee of Dalmia Family Office Trust, from where he resigned in the month of December 2020 which happened prior to search & seizure action carried out u/s 132. Moreover, the AO did not record a finding that the employer Dalmia Family Office Trust claimed to have paid the amount of Rs. 3,17,00,000/- to the appellant or made a provision for such expense of Rs.3,17,00,000/- in its books of account.

6.2 I am of the considered view that in the given circumstances when the amount of Rs.3,17,00,000/- was neither received by the appellant nor accrued to the appellant, the addition in the hands of the appellant is not justified at all. Therefore, I delete the addition of Rs. 3,17,00,000/-.

4. As with regard to addition of Rs.1,80,00,000/- u/s 69A of the Act it was found that cash amounting to Rs.1,82,01,300/- was found at the residence of assessee out of which Rs.1,80,00,000/- was found unexplained in his statement.

4.1 However, later on assessee submitted that by virtue of his knowledge of real estate sector certain persons approach him to help identify aggregate respective pieces of land and to negotiate on their behalf and he had received Rs.85,00,000/- as money from 3 persons whose name have been disclosed as Tansir Ahmed who had given Rs.30,00,000/-; Mushir Ahmed who had given Rs.25,00,000/- and Saghir Ahmed who had given Rs.30,00,000/-.

4.2 He also claimed that post retirement assessee has started business of trading in agriculture produce and assessee used to contract with farmers for purchase of agriculture produce and use to sell them to various dealers and amount of Rs.45,50,000/- was received from sale proceeds to sell agriculture produce and out of which Rs.18,00,000/- was assessee’s profit and remaining Rs.24,50,000/- was to be paid to farmers from whom agriculture produce were purchased.

4.3 He also explained that assessee’s daughter Smt. Vrinda Garg got married on 01.02.2017 and certain customary gifts aggregating to Rs.20,00,000/- were received at the time of her marriage and out of Rs.12,50,000/- remained after meeting expenses on the occasion and the same was left by his daughter with the assessee and his wife for safe custody. Assessee also claimed that the grand daughter was born in November, 2018 and her customary cash gifts of Rs.2,50,000/- received at the time of birth and subsequent ceremonies were left with the assessee and his wife. Remaining Rs. 39,51,300/- were claimed to be accumulated over a period of time by the assessee and his other family members.

4.4 The Assessing Officer was not satisfied with the explanation and made addition of Rs.1,80,00,000/-. The same has been partially sustained by the ld. CIT(A) by following findings in para 7 and its sub-grounds:

“7. Vide Modified Ground No. 3, the Appellant challenged the addition of Rs.1,80,00,000/- which was made u/s 69A. During search & seizure action u/s 132 conducted on the assessee, cash of Rs.1,82,01,300/- was found lying at his home. Out of total cash of Rs.1,82,01,300/-, cash of Rs.1,80,00,000/- was seized. I observed that the appellant could not explain the sources of the cash found during the search & seizure action u/s 132 of the Act, which is evident from the statement recorded u/s 132(4) during search action. However, during the assessment proceedings, the appellant stated that Rs. 85,00,000/- represented the cash left with him by three brothers-Tansir Ahmed, Mushir Ahmed, Saghir Ahmed towards purchasing of agricultural land, Rs.42,50,000/- represented the cash sale proceeds of agricultural produce belonging to farmers, Rs.15,00,000/-represented the cash savings of his daughterNrinda (married), and Rs.39,5 1,300/-represented the cash savings of his family.

7.1 During assessment proceedings, confirmations with supporting papers like revenue records from three brothers regarding cash of Rs.85,00,000/- were filed. During appeal proceedings, the appellant filed the confirmations with supporting papers like revenue records from three brothers regarding cash of Rs.85,00,000/-.

7.2 The appellant also stated that during assessment proceedings the AO made direct inquiries from Tansir Ahmed, Mushir Ahmed, Saghir Ahmed by issuing notices and calling for documents. To support his contention, copies of notices u/s 133(6) of the Act and the replies filed by Tansir Ahmed, Mushir Ahmed, Saghir Ahmed (with their portal generated acknowledgements) were filed before me. I am not inclined to give relief of such amount of Rs. 85,00,000/-as the availability of such cash in the hands of three brothers remained unproved. Moreover, during the course of search statement u/s 132(4) the appellant didn’t. give any justification, therefore this is nothing but an afterthought.

7.3 As far as claim regarding cash of Rs.42,50,000/- is concerned, relief of Rs. 18,00,000/- cannot be denied as such income was declared by the appellant in his ITR for AY 2021-22 u/s 44 AD.

7.4 No evidence /papers regarding the balance remaining cash were filed during assessment proceedings. However, considering the fact that the son and wife of appellant are also income tax filers and appellant is a senior citizen and tax filers for more than 35 years, a lump-sum relief of Rs.5,00,000/- on account of accumulated cash savings in the hands of the family members, out of the remaining addition of Rs. 1,62,00,000/-, will meet the’ends of justice’. In total the appellant will get a relief of Rs. 23,00,000/- for the reasons as mentioned above. The ground no. 3 is partly allowed.”

5. Therefore, assessee and department both are in appeal and have raised respective grounds which are reproduced below:

ITA No.4353/De1/2025 (Assessee’s Grounds)

“1. On the peculiar facts of the case and in law, the addition sustained by the learned CIT(A) to the extent of Rs.15700000/- (out of the addition made by the learned AO at Rs.18000000/-u/s 69A) is liable to be deleted.

2. On the peculiar facts of the case and in law, the learned CIT(A) ought to have accepted the claim of assessee that cash of Rs.8500000/-represented the money belonging to Tansir Ahmed, Mushir Ahmed &Saghir Ahmed which was lying with the assessee by way of ‘amanat.

3. On the peculiar facts of the case and in law, the learned CIT(A) ought to have held that the provisions of section 69A has no applicability in respect of addition of Rs. 8500000/-.

4. On the peculiar facts of the case and in law, the learned CIT(A) ought to have accepted the claim the claim of assessee that cash of RS.2450000/- (Rs.4250000/-less Rs.1800000/-) represented the amount payable by the assessee to the farmers towards their agricultural produces having been sold through the assessee.

5. On the peculiar facts of the case and in law, the learned CIT (A) ought to have held that the provisions of section 69A has no applicability in respect of addition of RS.2450000/-

6. On the peculiar facts of the case and in law, the learned CIT(A) ought to have accepted the claim of assessee that cash of Rs.4750000/-represented the accumulated cash savings of the family including the cash belonging to the assesee’s married daughter, lying at home of the assessee.

7. On the peculiar facts of the case and in law, the learned CIT(A) ought to have held that the provisions of section 69A has no applicability in respect of addition of RS.4750000/-.

8. On the peculiar facts of the case and in law, charging of interest u/s 234B is arbitrary, unjust & illegal, as the seized cash of Rs.18000000/-was lying with the IT Department since 17.03.2021.”

ITA No.5367/De1/2025 (Department’s Grounds)

“1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.3,17,00,000/- made by the Assessing Officer on account of bonus/commission receivable, ignoring the incriminating documents seized during the search and the assessee’s own sworn statement u/s 132(4) confirming the commission rates and transactions.

2. That the Ld. CIT(A) has erred in holding that there was no accrual of income merely because no provision was made OR payment recorded in the employer’s books, without appreciating that accrual arises when there is an enforceable right to receive income, as established by the seized documents and the assessee’s admission.

3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief of Rs. 18,00,000/-out of the addition of Rs. 1,80,00,000/- made u/s 69A on account of unexplained cash found during the search, merely on the basis that the said amount was declared in the ITR, without any direct correlation between the declared income and the seized cash.

4. That the Ld. CIT(A) has erred in granting an ad-hoc relied of Rs. 5,00,000/- on account of alleged family savings without any corroborative evidence, which is contrary to settled legal principles that the burden under section 69A lies entirely on the assessee to satisfactorily explain the nature and source of the cash.

5. That the appellant craves leave to add, alter, amend OR withdraw any OR all grounds of appeal at any time before OR during the course of the hearing.”

6. On hearing both the sides and giving thoughtful appreciation to the material on record, with regard to the appeal of department arising out of deletion of the addition of Rs.3,17,00,000/- made by the Assessing Officer on account of bonus/commission receivable, allegedly ignoring the incriminating documents seized during the search and the assessee’s own sworn statement u/s 132(4) confirming the commission rates and transactions, we find that it is crystal clear that even according to the learned AO, the assessee had not received the amount of Rs.3.17 Crores and also that the learned AO had treated Rs.3.17 Crores as the assessee income on due basis from his employer. It is an uncontroverted fact that the assessee was an employee of ‘Dalmia Family Office Trust’ and not of the Dalmia group as a whole. Treating the assessee an employee of all the entities working under Dalmia Group, is too far stretch, an assertion to draw a conclusion that assessee was working for the group as a whole and thus would have received this amount of Rs. 3.17 crores, on account of his services to the Group.

7. We find that the learned AO had nowhere mentioned in the assessment order that the assessee’s employer, had booked the expense of Rs. 31,700000/- while either making such payment to the assessee or making provision in their books of account. It is an undisputed fact that neither any document showing payment of Rs.3.17 Crores by to the assessee nor any document showing receipt of Rs.3.17 Crores by the assessee from ‘Dalmia Family Office Trust’ was seized. It is also an undisputed fact that even during the course of assessment proceedings, no such document had been brought on record by learned AO. We find substance in the contention of ld. AR that since there is no evidence or assertion that assessee had acquired any legal right to receive the said amount of Rs.3.17 Crores and the assessee could have claimed the said amount of Rs.3.17 Crores, at any time thereafter, the addition is not of any real income. Ld. CIT(A) has rightly deleted the same and the reasoned findings, need no interference. The corresponding grounds raised by department stand rejected.

8. Now coming to the appeal of assessee and the corresponding ground Nos. 3 & 4 of the appeal of the department, we find that assessee on his part has placed some vital evidences from page No. 49 to 82 of the paper book with regard to 3 persons namely Mushir Ahmad, Sagir Ahmed and Tahir Ahmed wherein copy of agreement or confirmation have been filed by which these persons have acknowledged the fact that they had handed over cash amounts to the assessee with a mandate to the assessee to purchase land and to enter agreement on behalf of these persons. Revenue record entries of these persons are placed to show their large landholding and earning agricultural income out of the produce. Then in response to the notice u/s 133(6) of the Act these persons had responded to the assessing officer wherein they admitted of the transaction of handing over cash to assessee with a mandate and that out of agricultural activities of big landholding they had earned agricultural income from commercial crops like sugar.

9. Now these evidences of the assessee have been brushed away by the assessing officer without pointing out any infirmities in the evidences or countering the evidences by any circumstances to show that these evidences are fabricated or are not reliable for any cogent reason but merely asserting it to be an afterthought story. We are of considered view that when assessing officer issued notice u/s 133(6) of the Act exercising the powers calling for verification of evidence and claim of assessee which is duly responded by the witnesses then just by alleging the claim to be an afterthought the same cannot be rejected. Rather it appears this attempted to verify the evidence of the assessee on the part of assessing officer was itself half hearted as notice u/s 133(6) were issued on 27.03.2023 and on 29.03.2023 the response was filed by the said persons and on 31.03.2023 the impugned assessment order was passed thereby indicating that assessing officer had merely gone ahead to complete formality without intending to consider the explanation offered by the assessee.

10. Ld. CIT(A) has also considered it to be an afterthought version as this explanation did not come from assessee while recording statement u/s 132(4) of the Act. On going through the statement available in the assessment order itself, we are of the considered view that when assessee was questioned u/s 134(2) he had merely narrated that he cannot explain the source of cash at this stage and that he will provide the explanation after checking his book and bank statement and other financials later on. Thus, to brush aside the explanation as afterthought without rebutting the evidence of the assessee was not justified on the part of ld. tax authorities below and thus, to the extent of denial of benefit to the asses see for explanation of Rs.85,00,000/- falling in ground No. 2 & 3 of the appeal of the assessee, we are inclined to sustain ground.

11. As, with regard to the remaining grounds of asses see and connected grounds of department are concerned, we are of the considered view that though a prudent and liberal approach is required to be adopted to consider an explanation given by assessee but same should be well found on some preponderance of probability. Mere bald assertions by assessee of source of cash found with him without any proof of corresponding events or corroborative evidences cannot be accepted. The ld. CIT(A) has thus being fair to give asses see benefit with regard to cash of Rs. 18,00,000/- for which assessee had declared the income in his ITR and ld. CIT(A) has been reasonable to give a lumpsum relief of Rs.5,00,000/- on account of accumulated cash savings in the hands of family members, thus, these relief of Rs.23,00,000/- given by the ld. CIT(A) requires no interference. However, what is confirmed by ld. CIT(A) except Rs.85,00,000/- requires no interference.

12. Consequently, the appeal of department is dismissed and that of assessee is partly allowed. The addition of Rs. 85,00,000/- shall stand deleted.

Order pronounced in the open court on 08.05.2026