Anil Dalmia Vs DCIT (ITAT Jaipur Bench)
A Code Name & Contact Number Are Not Evidence: Jaipur ITAT Deletes ₹4 Lakh Addition Based on Mere Suspicion
Summary: The assessee, Anil Dalmia, was subjected to reassessment proceedings following information received from the Investigation Wing regarding alleged cash transactions. A search & seizure operation u/s 132 had also been conducted in the case of the Nirmal Kumar Bardiya Group, which included the assessee.
The information initially relied upon by the AO alleged that the assessee had entered into cash transactions with Shri Ram Mohan Totla. An order u/s 148A(d) was passed, followed by issuance of notice u/s 148. The reassessment was thereafter completed by determining total income at ₹20,31,070.
During the reassessment, the AO made two additions. The first was ₹3,71,550 towards alleged unexplained interest income received by the assessee. The second was ₹4,00,000 u/s 69C, representing alleged interest or commission paid by the assessee out of unexplained sources.
The CIT(A) partly allowed the assessee’s appeal by deleting the addition of ₹3,71,550, which was the amount forming the basis of reopening. However, the CIT(A) sustained the separate addition of ₹4,00,000 u/s 69C. The assessee therefore approached the Tribunal challenging the surviving addition, besides questioning the validity of the reassessment.
Issues before the Tribunal
The principal issue was whether the addition of ₹4,00,000 u/s 69C could be sustained merely on the basis of a code name allegedly connected with the assessee & his mobile number found in another person’s contact list.
A connected legal issue was whether an addition on an issue unconnected with the recorded reason for reopening could survive when the addition based on the original reason for reopening had already been deleted by the CIT(A).
The assessee also challenged the reassessment on jurisdictional grounds, including the allegedly inadequate period allowed in the notice issued u/s 148A. However, the Tribunal ultimately allowed the appeal by deleting the addition of ₹4,00,000 on merits.
Assessee’s submissions
The assessee contended that the AO had assumed jurisdiction over the issue of alleged interest or commission payment on incorrect facts & unsupported assumptions. The amount of ₹4,00,000 had not formed part of the reasons recorded for reopening or the notice issued u/s 148.
The assessee pointed out that the notice identified only alleged escaped interest income of ₹3,71,550. The issue of ₹4,00,000 was introduced only at the fag end of the reassessment proceedings through a show-cause notice dated 26 March 2023.
It was further submitted that all relevant details had already been disclosed in the computation of income placed in the paper book. The corresponding TDS particulars were also available on record. Therefore, there was no basis for concluding that the assessee had incurred unexplained expenditure.
The assessee argued that the AO had relied only upon the expression “Paper Ka Kaam”, allegedly used as a code name by Shri Radha Mohan Maheshwari, together with the presence of the assessee’s mobile number in his contact list. Neither circumstance established that the assessee paid ₹4,00,000 as interest or commission from undisclosed sources.
Revenue’s contentions
The Revenue supported the order of the CIT(A) sustaining the addition. It relied upon the information gathered during investigation & the alleged connection between the code name, contact details & the assessee.
According to the Revenue, these circumstances indicated that the assessee was connected with the transactions discovered during investigation. The addition u/s 69C was therefore sought to be justified as unexplained interest or commission expenditure.
Tribunal’s findings & legal reasoning
The Tribunal first noted that the only income identified as having escaped assessment in the notice was ₹3,71,550. The alleged payment of ₹4,00,000 was not a subject matter of the notice u/s 148. It was introduced subsequently during the reassessment proceedings.
The Tribunal then examined the evidentiary foundation of the addition. The AO had linked the assessee with the amount merely because Shri Radha Mohan Maheshwari allegedly used the code name “Paper Ka Kaam” for him & because the assessee’s mobile number appeared in Maheshwari’s contact list.
The Tribunal expressed its inability to understand how these two circumstances could establish that the assessee had paid interest or commission of ₹4,00,000 from unexplained sources. A mobile number in another person’s contact list could, at best, establish familiarity or communication. It could not by itself prove the nature, amount or actual payment of any financial transaction.
Similarly, the code name “Paper Ka Kaam” did not contain any intrinsic reference to interest, commission, cash payment or unexplained expenditure. No corroborative material such as a cash ledger, receipt, statement identifying the assessee, payment trail or corresponding entry was brought on record.
The Tribunal held that the addition had been made on mere probabilities & a self-devised methodology having no legal basis. Section 69C requires evidence that the assessee actually incurred expenditure & failed to explain its source. Suspicion, coded expressions or contact details cannot substitute proof of expenditure.
Accordingly, the Tribunal held that the addition of ₹4,00,000 u/s 69C was unsustainable in law. It deleted the addition & allowed the assessee’s appeal.
Practical implications
The ruling reiterates that information discovered during a search must be supported by assessee-specific corroborative evidence before an addition can be made. A code name, telephone number or association with another person cannot independently prove an unexplained financial transaction.
For invoking section 69C, the Revenue must first establish that expenditure was actually incurred by the assessee. Only thereafter does the burden arise to explain its source.
The decision also underlines the vulnerability of additions made on issues unrelated to the recorded reasons for reopening, particularly where the original reassessment addition does not survive. Most importantly, it confirms that suspicion may trigger enquiry, but cannot sustain a tax addition without credible evidence linking the assessee to the alleged expenditure.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, JAIPUR BENCH
The Appellant, Anil Dalmia (hereinafter referred to as the ‘assessee’) by filing the present appeal, sought to set aside the impugned order dated 27.01.2026 passed by the Commissioner of Income Tax, Appeal CIT(A), Udaipur-02 [hereinafter referred to as the ‘CIT(A)’] qua the assessment order for Assessment year 2018-19 on the grounds inter-alia that:-
“1. That the reopening of assessment is bad in law and in facts of the case and the reassessment proceedings void-ab-initio. The notice has not been issued as per provisions of law and lacks jurisdiction. The addition made by A.O. on the basis of reasons for reopening has been deleted in appeal. The very foundation of the reopening is non-existent. Further Notice u/s 148(A), being less than 7 days is illegal. The issue of notice u/s 148 and consequent reassessment proceedings deserves to be quashed.
2. That addition on issue unconnected with the reasons of reopening is not permissible, particularly when the addition made on basis of reason of reopening itself has been deleted in appeal. The addition made is illegal and deserves to be deleted.
3. The Learned C.I.T. (A) erred in sustaining addition of Rs. 4,00,000/- u/s 69C. The addition made is against the facts of the case and deserves to be deleted.”
2. Briefly stated, facts necessary for consideration and adjudication at hand are: A search and seizure operation was carried out u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) at Nirmal Kumar Bardiya Group including the assessee on 19.04.2022. Thereafter on the basis of specific information received from DDIT Investigation, Jaipur that “the assessee has made cash transaction with Shri Ram Mohan Totla”. After providing reasonable opportunity of being heard and considering the reply filed by the assessee order passed u/s 148A(d) of the Act was passed on 31.03.2022. Thereafter notices u/s 148 and 143(3) of the Act were issued. After considering the submissions made by the assessee assessment was framed u/s 143(3) of the Act at the total income of Rs. 20,31,070/- after making addition of Rs. 4,00,000/- given as interest/commission paid from unexplained sources and addition of Rs. 3,71,550/- on account unexplained interest received by the assessee.
3. Assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Feeling aggrieved with the impugned order passed by the Ld. CIT(A), assessee has come up before the Tribunal by way of filing the present appeal.
4. We have heard Ld. ARs for the assessee and Ld. DR for the Revenue and perused the record available on file.
5. Undisputedly, in the first appellate proceedings, Ld. CIT(A) has partly allowed the appeal deleting the addition made by the Assessing Officer to the tune of Rs. 3,71,550/-, however confirmed the addition of Rs. 4,00,000/- u/s 69C of the Act.
6. Ld. AR for the assessee challenging the impugned addition of Rs. 4,00,000/- contended that the Assessing Officer has assumed jurisdiction on this issue on incorrect facts, because assessee has categorically shown, every details in the computation available at page 12 of the of the paper book and the assessee has also shown TDS details available at page 13 of the paper book.
7. Admittedly, addition of Rs. 4,00,000/- u/s 69C of the Act has been made by the Assessing Officer at the feg end of the assessment proceedings. Undisputedly, amount of Rs. 4,00,000/- added u/s 69C of the Act was not subject matter of the notice u/s 148 of the Act.
8. Perusal of the notice available at page 1 and 2 of the paper book shows that only interest income of Rs. 3,71,550/- was shown to have escaped assessment within the meaning of section 147 of the Act rather the same has been made, subject matter by the assessment vide show cause notice dated 26.03.2023.
9. Assessing Officer proceeded to make this addition on the basis of code name used by Shri Radha Mohan Maheshwari for the assessee as “Paper Ka Kaam” and further connected this information with the mobile Number of the assessee available in the contact details of Shri Radha Mohan Maheshwari. We failed to understand as to how the code name as “Paper Ka Kaam” and assessee’s mobile number in the contact list of Shri Radha Mohan Maheshwari can lead to the conclusion that assessee had paid interest/commission of Rs. 4,00,000/- from unexplained sources. To our mind the impugned addition of Rs. 4,00,000/- has been made on the basis of mere probabilities and self devised methodology having no legal basis.
10. In view of the matter addition of Rs. 4,00,000/- made by the Assessing Officer and confirmed by Ld. CIT(A) on account of interest/commission paid from unexplained sources, is not sustainable in the eye of law, hence order to be deleted.
11. Resultantly, the appeal filed by the assessee is hereby allowed.
Order pronounced in the open court on 25-08-2026
