Mumbai ITAT: WhatsApp Chats, Token Notes and Excel Sheets Cannot Justify Taxing Gross Receipts; Only Embedded Profit Taxable

Shaibaz Mohammadullah Khan Vs DCIT (ITAT Mumbai)

Mumbai ITAT: WhatsApp Chats, Token Notes and Excel Sheets Cannot Justify Taxing Gross Receipts; Only Embedded Profit Taxable

The Mumbai ITAT held that WhatsApp chats, token notes, handwritten slips and Excel sheets recovered during a search could not justify taxing the entire gross amount reflected therein, where the seized material merely indicated unaccounted business transactions. The Tribunal observed that the assessee was engaged solely in the business of garment exports and that the seized material represented unrecorded business receipts, not unexplained money or expenditure under Sections 69A or 69C. Accordingly, following settled law that only the profit element embedded in unaccounted sales can be brought to tax, the Tribunal directed the Assessing Officer to apply a 1% gross profit rate (instead of the 3% adopted by the CIT(A)) on the aggregate unaccounted sales.

The Tribunal also deleted the addition towards alleged cash salary paid to an employee, holding that the Revenue had relied on contradictory statements which were later clarified during cross-examination, where the employee admitted that he had not received any salary from the assessee and was independently carrying on an angadiya (money transfer) business. Further, the addition relating to cash, foreign currency and a gold coin found during the search was deleted after accepting the explanations regarding recorded cash balances, the gifted gold coin and foreign currency belonging to a Yemeni client kept in safe custody. The Tribunal thus granted substantial relief to both assessees by holding that dumb electronic material without proper corroboration cannot result in taxation of gross receipts, and that at best only the profit attributable to unaccounted business transactions could be assessed.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. Aforesaid appeals by two assessees for captioned assessment years(AY) have identical / connected facts and issues. First, we take up appeal of Shri Javeed Ismail Khatri ITA No.3444/Mum/2026 for AY 2023-24 which arises out of an order of learned Commissioner of Income Tax (Appeals)-48, Mumbai [CIT(A)] dated 12.02.2026 in the matter of an assessment framed by learned Assessing Officer u/s 143(3) of the Act on 24.05.2024. The grounds of appeal read as under:

1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in sustaining addition of Rs.15,77,729/-, calculated at 3% of aggregate of alleged value of token notes and alleged figures obtained from Whatsapp Chat in the mobile phone of Mr. Shaibaz Khan [i.e. 3% of Rs.5,22,90,963/- (Rs. 4,70,26,200 + Rs. 55,64,763)]:

1.1. On the facts and circumstances of the case and in law, the Ld. CIT(A), erred in holding Rs.7,49,975/-, as alleged unaccounted sales, by placing reliance on excel sheet named ‘Fina ILala’ despite recording the finding that the said sheet did not mention any time range or financial years to which the alleged transactions were related to and without considering that the excel sheet named ‘Final Lala’ was merely dumb documents having no evidentiary value in absence of corroborative evidence and certificate u/s 65B of Indian Evidence Act,1872. Accordingly, the Ld. CIT(A) erred in extrapolating the alleged information in the said excel sheet to the year under consideration.

1.2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in sustaining addition of Rs. 6,04,345/-, calculated at 3% of alleged value of token notes and alleged figures obtained from Whatsapp Chat in the mobile phone of Mr. Shaibaz Khan [i.e. 3% of Rs. 5,22,90,963/- (Rs. 4,70,26,200 + Rs. 55,64,763)], as profit element on alleged unaccounted sales, disregarding that ‘token notes’ and ‘Whatsapp Chat’, which formed the basis of impugned addition, were merely dumb documents, having no evidentiary value in absence of corroborative evidence and certificate u/s 65B of the Indian Evidence Act, 1872.

1.3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in sustaining addition of Rs. 6,04,345/-, calculated at 3% of alleged value of ‘token notes’ and alleged figures obtained from Whatsapp Chat in the mobile phone of Mr. Shaibaz Khan [i.e. 3% of Rs. 5,22,90,963/- (Rs. 4,70,26,200 + Rs. 55,64,763)], as profit element on alleged unaccounted sales, by holding that ‘token notes’ related to appellant’s business, disregarding that during cross-examination on oath before Ld. JAO, Mr. Shaibaz Khan had affirmed that ‘token notes’ pertained to his Angadiya business and commission income on such Angadiya Business was already offered for tax by Mr. Shaibaz Khan and hence, no addition should have been made in the hands of the appellant.

1.4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in sustaining addition of Rs. 6,04,345/-, calculated at 3% of alleged value of ‘token notes’ and alleged figures obtained from Whatsapp Chat in the mobile phone of Mr. Shaibaz Khan [i.e. 3% of Rs. 5,22,90,963/- (Rs. 4,70,26,200 + Rs. 55,64,763)], as profit element on alleged unaccounted sales, on the basis of ‘Whatsapp Chats’ on the mobile phone of Mr. Shaibaz Khan, disregarding that said ‘Whatsapp Chats’ pertained to Angadiya Business of Mr. Shaibaz Khan, commission income from which was already offered for tax by Mr. Shaibaz Khan, and hence, no addition should have been made in the hands of the appellant.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 12,00,000/- u/s 69C of the Act, being alleged salary payment in cash to Mr. Shaibaz Khan, disregarding that the said addition was made by Ld. A.O. solely on the basis of statements of Mr. Shaibaz Khan and of the appellant u/s 132(4) of the Act, which were subsequently retracted and the addition is made without any corroborative evidence.

3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 12,00,000/- u/s 69C of the Act, being alleged salary payment in cash to Mr. Shaibaz Khan, disregarding the fact that during cross-examination on oath before Ld. JAO, Mr. Shaibaz Khan had affirmed that he did not receive any salary in cash or in cheque from the appellant, hence, no addition should have been made in the absence of any other corroborative evidence.

4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 18,14,596/- u/s 69A of the Act, being aggregate of value of Indian Currency, Foreign Currency and Gold Coin, found and seized during the course of search u/s 132 of the Act, disregarding that the pre­requisites for making such addition u/s 69A of the Act were not fulfilled and therefore, no addition should have been made in the hands of the appellant.

5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that Ld. JAO’s reliance on statements recorded u/s 132(4) of the Act was not misplaced disregarding the affidavit dated 23.01.2023, filed by the appellant before Ld. JAO, retracting his statement u/s132(4) of the Act, which set out the circumstances demonstrating how the said statement was obtained under coercion.

2. The Ld. AR advanced arguments and referred to various documents as placed on record to assail the impugned additions. The written submissions have also been filed along with supporting case laws. The Ld. Sr. DR also advanced arguments and referred to the findings of lower authorities. A detailed written submission has also been filed during the course of hearing. Having heard rival submissions and upon perusal of case records, our adjudication would be as under.

Assessment Proceedings

3. The assessee filed regular return of income at Rs.281.25 Lacs on 21.10.2022. However, pursuant to search action u/s 132 on 18.01.2023 at the premises of the assessee i.e., 226, Ashoka Shopping Centre, GT Hospital Complex, LT Road, Mumbai, the assessee’s case was subjected to scrutiny and a notice u/s 143(2) was issued by Ld. AO to the assessee on 01.12.2023 which was followed by notices u/s 142(1) calling for various details from the assessee. The assessee acted as proprietor of M/s Zeeson which is stated to be engaged in export of readymade garments and fabrics. Most of the Exports are made to Yemen and the assessee acted as intermediary to suppliers in India and customers in Yemen under valid export license. On the basis of search findings, Ld. AO made various additions in the hands of the assessee which are enumerated as under.

4. Addition of Freight Charges allegedly received in cash

4.1 During search at the premises, an excel sheet (last modified on 08.01.2022) was found by the name ‘FINAL LALA’ in Samsung desktop. The digital data back-up of the computer was taken and seized. The said sheet was confronted to the assessee during search and his statement was recorded u/s 132(4). His reply to Q.No.33 was as under:

Sir, the Worksheet has been created by my staff on my direction. Lala means Salalah port and the sheet has details of rate which is charged by us in cash from the customers. In this sheet at column number 2 and 3, no. of cartons and freight at the rate of Rs.1700 per carton has been mentioned. In last columns total amount due is recorded. In last column where “0” or “C” is mentioned, the balance has been cleared by the party.

4.2 Going by this reply, Ld. AO concluded that the assessee received cash for freight charges for export through Salalah Port for which no invoices were raised. The Ld. AO proceeded to consider these receipts as unaccounted income of the assessee. Accordingly, the assessee was show-caused during the course of assessment proceedings.

4.3 The assessee opposed any such addition, inter-alia, on the ground that the recorded statement stood retracted vide affidavit dated 23.01.2023. The notings were mere rough jotting of maximum rate that could be charged from customers. The assessee was an exporter and not the transporter who will charge freight for the goods. The exports were generally on FOB basis only. The excel sheet was prepared for noting purposes only. The statement was involuntary and recorded under pressure. Further, all the freight charges were included in the exports bills and actual freight charges as received by the assessee were offered for taxation. The addition was on the basis of loose paper which does not form part of assessee’s regular books of accounts and the same could not be considered as cogent evidence without any corroboration thereof. Reference was made to various judicial decisions to support the argument. The assessee also opposed extrapolation of figures.

4.4 The Ld. AO rejected the aforesaid submissions of the assessee. The number of cartons exported through Salalah port was 1696 on which Ld. AO applied freight rate of Rs.1700/- per carton to make addition of unexplained money u/s 69A for Rs.28,83,200/-. To support the same, Ld. AO referred to whatsapp chat as found from the mobile phone of the assessee supporting receipt of freight charges in cash. The same was in the shape of cash vouchers which aggregated to Rs.50,500/- and accordingly, separately added to the income of the assessee. Finally, Ld. AO made aggregate addition of Rs.29,33,700/-in the hands of the assessee.

5. Unexplained Transactions

5.1 During search, Indian currency notes of varied denomination along with hand-written slips attached with each note were found. In recorded statement, it was stated by the assessee that these notes were tokens which were used to make cash payment to various parties. It was further stated that tokens were received by the assessee’s employee Shri Amir Hussain Alias Saddam. One Shri Shaibaz Mohammadullah Khan used to receive photo images of these tokens in his phone and he used to send it to Shri Amir Hussain. When party used to come with actual physical token in the form of currency notes of various denominations, he would take the said currency note and would record the details of transactions such as date, name of party, amount etc. in a slip which would be attached along with the note. Shri Aamir Hussain also confirmed that they used currency notes to make cash payments to the parties.

5.2 During the course of assessment proceedings, the assessee stated that these transactions were not related to the assessee or his business. These tokens were received against the money paid to the token holder by Mr. Shaibaz Khan. These transactions were done by him as money transfer agent at commission of 0.2% to 0.3%. These transactions were between the payer and receiver of the cash and the assessee had no role in these transactions. Mr. Shaibaz Khan was stated to be sharing assessee’s business without consideration who worked for the assessee and also carried out his own work. He acted as a money transfer agent and shared the premises of the assessee to facilitate the assessee to transfer money on priority basis and with ease. The currency notes were not related to the assessee but related to independent business being carried out by Mr. Shaibaz Khan as money transfer agent against commission. The assessee did not pay any salary to him for this work nor charged any rent or expenses for using office premises.

5.3 The aforesaid explanation of the assessee stood rejected by Ld. AO. The amount paid under such token aggregated to Rs.470.26 Lacs. After adjusting the alleged cash freight receipt for Rs.28.83 Lacs, the remaining amount of Rs.441.43 Lacs was added to the assessee’s income as unexplained expenditure u/s 69C.

6. Unverifiable / Suspicious purchases

The assessee made purchases of Rs.9,69,660/- from M/s Aaravo Reins Wasser Pvt. Ltd. which was a non-filer. In support of the transactions, the assessee furnished purchase invoices, corresponding export invoices, shipping bills, bank statement evidencing payment through banking channels etc. However, Ld. AO estimated profit of 4% on these purchases to make addition of Rs.38,786/- u/s 69C. However, this addition has already been deleted by Ld. CIT(A) and the same is not the subject matter of assessee’s appeal before us.

7. Salary given to Shri Shaibaz Khan for Rs.12 Lacs

During search, statement of Shri Shaibaz Mohammadullah Khan was recorded u/s 132(4). In reply to Q.No.16, he admitted that he received monthly salary from proprietor of M/s Zeeson in cash for Rs.1 Lacs per month. However, this salary was not offered to tax by him. During assessment proceedings, Ld. AO proposed addition thereof in the hands of the assessee as unexplained expenditure u/s 69C and show-caused the assessee. The assessee stated that Shri Shaibaz Khan was sharing office premises without any consideration. He was working occasionally for the assessee while doing his own independent work. The cash transaction in the nature of angadiya at a commission of 0.1% to 0.3% were being handled by him independently. The assessee was not paying any salary to him for any work and also not charging any rent of expenses for using office space due to friendship and old relationship. The salary of Rs.1 Lacs as stated by him may be his income from transaction of money transfer agency. However, rejecting the same, Ld. AO made addition of Rs.12 Lacs u/s 69C.

8. Addition of Misc. Transactions for Rs.55,64,763/-

8.1 This addition was on the basis of whatsapp chat as found from the Samsung Z fold-3 mobile phone of Shri Shaibaz Mohamadullah Khan. This conversation was with Vinodbhai of Vandan Garment from whom the goods were purchased and exported to Yemen. In these chats, Vinodbhai was asking cash against the payment received from Yemen Party. Shri Shaibaz Khan, in recorded statement, stated that he gave cash to Vinodbhai on his requirement and later on transaction was reversed. No goods were actually supplied on this transaction. Similar chat was found between him and Farrazbhai and Maganbhai. Similarly, a red colored dairy named as ‘Dairy 2017 SWE’ was found from office premises of Shri Shaibaz Khan. The addition was made on the basis of Page Nos.26-27 of the said diary which had similar noting of cash payment.

8.2 The Ld. AO also referred to two whatsapp chats as found from the Samsung Galaxy S-9 Plus mobile phone of the assessee. In the first chat, it was stated that they receive USD from parties in Saudi, sometime take cash and transfer USD to parties and earn commission on the said transactions. In the second chat, it was stated that his employee Mr. Danish collected unaccounted cash of Rs.16,14,763/-. All these transactions were confronted to the assessee during assessment proceedings. The aforesaid transactions were summarized as under: –

8.3 The assessee stated that the aforesaid transactions were not related to assessee’s business but related to angadiya business of Mr. Shaibaz Khan. The assessee had nothing to do with these transactions. Mr. Shaibaz Khan acted as money agent who, at the instruction of the payer, received cash and transferred the cash to the recipient against token as identification of parties. However, Ld. AO rejected the same and made addition of Rs.55,64,763/- for all these transactions.

9. Undisclosed Income addition for Rs.18,14,596/-

During survey proceedings on assessee on 16.01.2023, following items were found and valued: –

The above items were valued at Rs.18,14,596/-. The assessee could not provide satisfactory explanation and accordingly, survey proceedings were converted into search u/s 132 on 18.01.2023. The assessee had available cash in the books for Rs.2.57 Lacs. The excess cash was stated to be out-of-book freight income, cash received from parties from whom purchases were booked but goods received from some other parties etc. During assessment proceedings, the assessee stated that USD 10000 was given by to Shri Amir Hussain by Shri Mahmud Bakar (brother of Abu Bakar) in November and December, 2022 to keep with him. The remaining currency was stated to be from old time, from the time of his visit to Dubai. The assessee maintained that he just acted as custodian of foreign currency for some client who use to keep foreign currency in his safe custody for use as and when required during visit to India. Shri Amir Hussain already confirmed that these currency notes belonged to Abu Bakar (a Yemeni citizen). The assessee was not a money changer but acted as custodian of the envelop owned by Yemeni national which was required to maintain the relations with that customer. The cash-in-hand of as per books of the assessee was stated to be Rs.2.57 Lacs whereas cash balance in the books of Shri Shaibaz Khan was stated to be Rs.9,69,908/-.However, all these explanations stood rejected by Ld. AO and finally, the aggregate amount of Rs.18,14,596/- was added to the income of the assessee as unexplained money u/s 69A.

10. Finally, the assessment was framed wherein the returned income of Rs.281.25 Lacs was determined at Rs.838.19 Lacs after making aggregated additions of Rs.556.94 Lacs in the aforesaid manner. Aggrieved, the assessee preferred first appeal against the assessment order.

Appellate proceedings

11.1 The assessee assailed the impugned additions by way of elaborate written submissions which have already been extracted in the impugned order and the assessee made reference to various judicial decisions to support the same. The adjudication of Ld. CIT(A) is contained from Page-91, Para-8 onwards of the impugned order. The addition of Rs.29,33,700/-, Rs.4,41,43,000/- and Rs.55,64,763/- has been dealt with by Ld. CIT(A) collectively.

11.2 On the addition on the basis of ‘Final Lala’ Sheet, the Ld. CIT(A) upheld the validity of the same. However, he concurred with assessee’s submissions that the said sheet did not mention any time range or financial years for which these transactions were related to. The Ld. AO extrapolated the data found in the document to the year under consideration without accounting for the actual volume of exports in this specific year. The total exports to Salalah Port during the period from AYs 2020-21 to 2023-24 were 28,560 cartons. The unaccounted freight charges on 1696 cartons was accordingly spread over various assessment years in proportion to actual cartons exported in these years. The said computation restricted impugned addition to Rs.7,49,975/- for this year.

11.3 It was further held by Ld. CIT(A) that currency notes as found attached with slips stemmed from same business of garments exports. The amounts mentioned in the slips found with small currency notes were flowing from and resulted out of unaccounted sales of assessee’s garment business only. These slips could not be considered to be arising out of angadiya business as stated to be carried out by Shri Shaibaz Khan. At the same time, treating entire gross amount as unexplained expenditure was legally not justified since the nature and source of amounts could clearly be identified as stemming from unaccounted business sales only. Ultimately, these amounts partake the character of unaccounted sales rather than purely unexplained money u/s 69A. Similarly, the amount of Rs.55,64,763/- as obtained from whatsapp chats were nothing but business transactions of the assessee where the token was received over the phone and payments were made. Therefore, profit element embedded in these transactions was to be considered as the income of the assessee.

11.4 At para 8.3.13, it was observed by Ld. CIT(A) that AO made addition of Rs.29,33,700/- for out-of-books freight payments. The additions made for total value of tokens was Rs.4,70,26,200/-. The Ld. AO allowed telescoping benefit of Rs.29,33,700/- and made addition of Rs.4,41,43,000/-. The addition of Rs.29,33,700/- was restricted to the extent of Rs.7,49,975/- based on proportionate cartons exported during the year under consideration. Since the amount of Rs.4,70,26,200/-mentioned in slips found along with small currency notes was stemming from unaccounted sales of the business, the amount of Rs.7,49,975/- was automatically covered in it if unaccounted sales were taken at Rs.5,22,90,963/- (Rs.4.70,26,200/- plus Rs.55,64,763/-). The token notes were effectively realization of unrecorded freight / export proceeds. Adding them separately would amount to double addition. Therefore, the separate addition of Rs.29,33,700/-, Rs.4,41,43,000/- and Rs.55,64,763/- were deleted. Instead profit element on unaccounted sales of Rs.5,22,90,963/- was to be determined as unaccounted business income and taxed accordingly.

11.5 To determine the profit element, the GP rate of the assessee entity was worked out from audit reports as under: –

The Ld. CIT(A) estimated higher GP rate of 3% on aggregate unaccounted sales of Rs.5,22,90,963/- to restrict the impugned additions to the extent of Rs.15,77,729/-. Aggrieved, the assessee is in further appeal before us.

11.6 On the issue of alleged salary payment of Rs.12 Lacs to Shri Shaibaz Khan, it was held by Ld. CIT(A) that the statement recorded u/s 132(4) would have evidentiary value. His involvement in assessee’s business was established. The retraction was without cogent evidence and payment of salary to a key person managing the unrecorded transaction was a logical consequence of business arrangement which stood established by the seized document. Therefore, this addition was confirmed against which the assessee is in further appeal before us.

11.7 On the issue of misc. addition of foreign currency etc., it was held that these items were found from the possession of the assessee at his business premises and the primary onus was on assessee to explain the same. The explanation of the assessee that he acted as custodian for foreign clients was self-serving. The assessee failed to produce any corroborative evidence to substantiate this claim. There was no confirmation letter from Yemeni clients and no documents was seized during search which would indicate such safe custody arrangement. Therefore, the addition of Rs.18,14,596/- was confirmed against which the assesse is in further appeal before us.

Our findings and Adjudication

12. From the facts, it emerges that the assessee is engaged in export of readymade fabric and garments on FOB basis through his proprietorship concern M/s Zeeson. Pursuant to search action on 18.01.2023, impugned assessment has been framed and various additions have been made in the hands of the assessee. During search, statement of the assessee and Shri Shaibaz Khan was recorded u/s 132(4) which has been referred to by Ld. AO to make impugned additions in the hands of the assessee. Though the statementwas retracted by the assessee vide affidavit dated 23.01.2023, the retraction has been rejected by lower authorities. During search, some token notes of small denominations with hand­written slips attached to them were found from the desk of Shri Shaibaz Khan. The foreign currency, Indian currency and 10 grams cold coin was also found which was valued at Rs.18,14,596/-. The Ld. AO has also referred to whatsapp chats as extracted from mobile phone of the assessee as well as from mobile phone of Shri Shaibaz Khan to support the impugned additions. The Ld. CIT(A) has granted partial relief to the assessee and confirmed certain additions against which the assessee is in further appeal before us.

13. The following three additions, as made by Ld. AO in the assessment order, have been dealt with by Ld. CIT(A) in the impugned order on a collective basis: –

The Ld. CIT(A), in the light of assessee’ submissions and evidence on record, held that the aforesaid transactions were nothing but they represent unaccounted business receipts stemming from assessee’s business of garments exports. The amounts mentioned in the slips found with small currency notes were flowing from and resulted out of unaccounted sales of assessee’s garment business only. These amounts partake the character of unaccounted sales rather than purely unexplained money u/s 69A. Therefore, gross amount could not be brought to tax but profit element embedded therein was to be brought to tax. Reference has been made to the decision of Hon’ble Apex Court in the case of S.C.Kothari (82 ITR 794) as well as the decision of Hon’ble High Court of Bombay in the case of Hariram Bhambani (92 CCH 0046) besides the decision of Hon’ble Gujarat High Court in the case of President Industries (258 ITR 654) & the decision of Hon’ble Madhya Pardesh High Court in Manmohan Sadan (304 ITR 52).0n the basis of these decisions, it has been held that only profit element embedded in these transactions is to be considered as the income of the assessee. The aggregate of such transactions have been pegged at Rs.5,22,90,963/- (Rs.4,70,26,200/- plus Rs.55,64,763/-) on which Ld. CIT(A) has applied GP rate of 3% considering the profitability trend of the assessee as per audited accounts.

14. We are of the considered opinion that all the three issues have been clinched in correct perspective by Ld. CIT(A). It could clearly be seen that the assessee is solely engaged in business activities only and the only source of income is business activities. The assessee does not act as a money changer. Whatever transactions are found recorded, the same stem from unaccounted business receipts only. On these facts, the action of Ld. CIT(A) in making estimation of GP on these transactions could not be faulted with except to the extent of application of GP rate. From profitability trend as per audited accounts, it could be ascertained that the assessee’s average GP rate for 5 years is less than 1%. Therefore, estimation of 3%, in our considered opinion, is on the higher side. Considering the same, we direct Ld. AO to apply GP rate of 1% on aggregated unaccounted sales of Rs.5,22,90,963/-and re-compute the income of the assessee. No other interference is called for in the impugned order. The corresponding grounds of assessee’s appeal stand partly allowed.

15. So far as the addition of Rs.12 Lacs is concerned, we find glare contradiction in the statement of Shri Shaibaz Khan. In reply to Q.No.16, it was stated by him as under: –

Q.16 Please explain who is paying your salary in Zeeson and also state the mode of payment of salary?

Ans. Sir, I am receiving every month salary from propietor of Zeeson Mr. Javed Ismail Khatri in Cash in 1,00,000/- per month.

However, his answer to Q.No.13 was as under: –

Q.16 Please state all your sources of income. Also state your annual income from all your sources?

Ans. Sir, I am working as a customer handler of Zeeson and my source of income is salary from Zeeson of amounting to Rs.50,000/- per month. I am also earn commission income amounting to Rs.10,000/- per month (approximately) from proprietorship of MIs Khan & Co.

It could thus be seen that the statement is contrary in nature and therefore, the same loses its veracity and could not be relied upon to make impugned addition of alleged salary payment in cash. There is no admission of any such payment in cash by the assessee. Moreover, Shri Shaibaz Khan has reported commission income from money transfer business which is offered and accepted as business income only. Apparently, Shri Shaibaz Kahn has shared assessee’s business premises to carry out independent business while facilitating assessee’s business. Also, the assessee was afforded cross-examination of Shri Shaibaz Khan wherein the fact of carrying out of angadiya business by Shri Shaibaz Khan has been accepted by him. It was further admitted by Shri Shaibaz Khan that he did not receive any salary in cash or in cheque from the assessee. On these facts, the impugned addition of Rs.12 Lacs as confirmed in the impugned order could not be sustained in law. We order so. The corresponding grounds of assessee’s appeal stand allowed.

16. The last issue in the appeal is confirmation of addition of Rs.18,14,596/- which includes cash of Rs.9,16,500/-. In this regard, the assessee, vide his reply dated 16.05.2024 to Ld. AO, demonstrated that it had cash balance of Rs.2.57 Lacs and another cash balance of Rs.9,69,908/- was available in the books of Shri Shaibaz Khan which has not been considered by Ld. CIT(A). In the absence of any rebuttal to this fact, the addition, to that extent could not be sustained.

With respect to Gold coin of 10 Gram, it was stated by the assessee that this coin received in gift in the year 2022 and the value thereof did not exceed Rs.50,000/-. There is no fact on record that this coin was purchased by the assessee during this year only. In the absence of any rebuttal to assessee’s explanation, the addition, in this respect, could also not be sustained.

The remaining addition represents foreign currency of USD 10070 and Riyal 4000 which are stated to be belonging to Shri Abobakar Abdhullah Saif (a Yemeni national) who happen to be assessee’s clients. The currency is stated to be kept in safe custody for use during his visits to India as and when required. In support, the assessee had placed on record confirmation of the said party. However, no independent verification of the same has been done by Ld. AO. By furnishing the relevant documents, the assessee has duly discharged its onus of proving the existence of impugned currency and successfully established that he was not the owner of such currency. Pertinently, these evidences have not been rebutted by Ld. AO. Therefore, this addition could also not be sustained. We order so. The corresponding grounds of assessee’ appeal stand allowed. No other ground has been urged in the appeal. The appeal stands partly allowed.

17. Shri Javeed Ismail Khatri : AYs 2019-20 to 2022-23

An assessment has been framed for AY 2019-20 u/s 147 on 30.03.2024 wherein Ld. AO made addition of Rs.126.50 Lacs on the basis of token notes besides alleged salary payment in cash to Shri Shaibaz Khan for Rs.12 Lacs. Similar twin additions have been made for AYs 2020-21 to 2022-23. The Ld. CIT(A) has estimated profit element of 3% on token note additions but confirmed addition of Rs.12 Lacs in all the years. Aggrieved, the assessee is in further appeals before us.

18. Facts being pari-materia the same as in AY 2023-24, taking the same view, we direct Ld. AO to apply GP rate of 1% on token value additions. The addition of Rs.12 Lacs, in all these years, stand deleted. All the appeals stand partly allowed.

19. Shri Shaibaz Mohammadullah Khan : AYs 2021-22 & 2023-24 An assessment has been framed by Ld. AO for this assessee for AY 2021-22 u/s 147 r.w.s. 143(3) on 24.05.2024 after making additions of alleged salary payment of Rs.12 Lacs and protective addition of unexplained money u/s 69A for Rs.158.99 Lacs. The protective addition stood deleted by Ld. CIT(A) whereas the addition of Rs.12 Lacs was confirmed. Similar are the facts in AY 2023-24 wherein the assessee is aggrieved by confirmation of addition of Rs.12 Lacs.

20. Since we have deleted the addition of Rs.12 Lacs in the hands of payer i.e., Shri Jeveed Ismail Khatri, the addition in the hands of this assessee-payee also stand deleted, for both the years. Both these appeals stand allowed.

Conclusion

21. The assessee’s appeals ITA Nos.3441 to 3445/Mum/2026 stand partly allowed. The assessee’s appeal ITA Nos.3463 & 3464/Mum/2026 stand allowed.

Order pronounced u/r 34(4) of ITAT Rules, 1963.