Dimple Manoj Sanghvi Vs DCIT (ITAT Ahmedabad)
A Name in a Family Diary Is Not Proof of Unexplained Spending: ₹33.50 Lakh Addition u/s 69C Deleted After Telescoping Family Cash Withdrawals
The Ahmedabad ITAT deleted an addition of ₹33.50 lakh made u/s 69C on the basis of handwritten entries appearing in diaries seized from the residence of the assessee’s father-in-law. The Tribunal accepted that the entries represented cash belonging to the father-in-law, which was handed over to the assessee, a homemaker residing in the same bungalow, for safe custody and was subsequently returned by her.
Since the father-in-law’s recorded cash withdrawals and opening cash balance were sufficient to explain the amounts reflected in the seized ledger, the Tribunal granted the benefit of telescoping and held that no addition could survive in the assessee’s hands.
The assessee, Dimple Manoj Sanghvi, filed her return for AY 2012-13 declaring a total income of ₹4,48,174. A search u/s 132 was conducted on 23.11.2021 in the cases of the Ratnamani Group, its key associates & family members, including the assessee.
During the search at the residential premises of Shri Prakash Mishrimal Sanghvi, the assessee’s father-in-law, several handwritten diaries and loose papers were found and seized. These documents contained handwritten entries covering financial years relevant to AYs 2010-11 to 2021-22.
Based upon the seized material, reassessment proceedings u/s 147 were initiated against the assessee. The diaries contained ledger accounts in the names of “Dimple Manoj New A/c” and “Dimple M. Sanghvi A/c.” The AO treated the net incremental negative peak balance in these accounts as expenditure incurred by the assessee from an unexplained source and made an addition of ₹33.50 lakh u/s 69C.
Before the CIT(A), the assessee explained that the entries did not represent her independent transactions or expenditure. She was a homemaker without any independent source of income and was residing in the same bungalow with her husband and father-in-law. Cash belonging to her father-in-law was occasionally handed over to her for safe custody. Whenever the cash was returned, the father-in-law recorded the movement in the diary under her name merely to maintain a record.
The CIT(A) rejected the explanation and confirmed the addition. The assessee, therefore, carried the matter to the Tribunal.
Before the ITAT, it was pointed out that identical additions had been made in the assessee’s hands for other assessment years on the basis of the same seized diaries. In ITA Nos. 1376 to 1381/Ahd/2024, decided by a common order dated 29.04.2026, the Ahmedabad ITAT had already examined the same factual pattern and granted relief.
In the earlier order, the Tribunal accepted that in a joint family it was not unusual for cash brought into the home to be handed over to the homemaker for safe custody. The fact that the diary contained an account in the assessee’s name did not automatically mean that the money belonged to her or that she had incurred expenditure from an unexplained source.
The crucial aspect was that Shri Prakash Sanghvi’s own cash withdrawals, as recorded in the seized diaries, were more than sufficient to cover the amounts subsequently returned by the assessee. The entries under the assessee’s name were, therefore, regarded as a record of the receipt and return of the father-in-law’s money rather than evidence of any unexplained expenditure incurred by her.
For the present year also, the assessee furnished a year-wise statement of cash withdrawals reflected in the seized diaries. The statement showed withdrawals of ₹19.24 lakh in FY 2009-10, ₹29.59 lakh in FY 2010-11, ₹31.22 lakh in FY 2011-12 and ₹36.31 lakh in FY 2012-13. The cumulative withdrawals up to FY 2012-13 amounted to approximately ₹1.16 crore.
Across the entire period from FY 2009-10 to FY 2020-21, the diaries recorded aggregate withdrawals of approximately ₹6.72 crore. The assessee contended that these withdrawals, together with the opening cash-in-hand, were sufficient to explain all the cash movements recorded in the family diaries.
The Department was unable to distinguish the earlier decision in the assessee’s own case either on facts or in law. The Tribunal found that the factual matrix and the nature of the seized material for AY 2012-13 were identical to those already considered for the other assessment years.
The ITAT accordingly directed that the assessee should be granted the benefit of telescoping in respect of the cash withdrawn by her father-in-law, handed over to her for safe custody and subsequently returned, as reflected in the ledger notings.
After considering the computation furnished by the assessee, the Tribunal concluded that the recorded cash withdrawals and opening cash balance were sufficient to cover the amount under consideration. It, therefore, deleted the entire addition of ₹33.50 lakh u/s 69C.
The grounds challenging the validity of the reassessment proceedings u/s 147 and the notice u/s 148 were dismissed as not pressed. Since the addition was deleted on merits, the remaining grounds concerning natural justice and the validity of the search proceedings were treated as infructuous. The appeal was consequently partly allowed.
Cases Discussed
- Dimple Manoj Sanghvi – ITA Nos. 1376 to 1381/Ahd/2024; Common Order dated 29.04.2026
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. The present appeal has been preferred by the Assessee against the Order, dated 16/05/2024, passed by the Commissioner Of Income Tax, (Appeals)-11 Ahmedabad [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had partly allowed the appeal against the Assessment Order, dated 08/06/2023, passed under Section 143(3) r.w.s 147 of the Income Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year 2012-2013.
2. The Assessee has raised following grounds of appeal:
1. The Learned CIT(A) has erred in not holding that the notice issued u/s. 148 of the Act is bad in law, illegal and void-ab-initio. The Learned CIT (A) has further erred in not holding that procedure as per law was not followed while issuing the notice u/s. 148 of the Act.
2. The Learned CIT (A) has erred in not holding that the assessment order passed by AO u/s. 147 of the Act is bad in law, illegal and null and void.
3. The Learned CIT(A) has erred in confirming the addition of Rs.33,50,000/- made by the AO u/s. 69C on account of Unexplained expenditure based on noting in loose papers seized from the premises of Shri Prakash Sanghvi.
4. The Learned CIT(A) has erred in not holding that the assessment order passed by AO is in gross violation of principles of natural justice
5. The Appellant states that the search proceedings carried out in his case are beyond jurisdiction, illegal and void. The consequential assessment order passed is bad-in-law, illegal and void-ab-initio.
3. The relevant facts in brief are that the Assessee, a resident individual, filed return of income on 26/07/2012, declaring a Total Income of INR.4,48,174/-. Later a search and seizure action under Section 132 of the Act was conducted on 23/11/2021 in the case of the Ratnamani Group, its key associates, and their family members (including the Assessee). During the search operation carried out at the residential premises of Mr. Prakash Mishrimal Sanghvi (the father-in-law of the Assessee) [hereinafter referred to as ‘PMS’] several handwritten diaries and loose papers containing hand-written noting were found and seized. These seized materials contained jotting/noting for the financial years relevant to Assessment Year 2010-11 to 2021-2022. Consequent to the search, reassessment proceedings under Section 147 of the Act were initiated in the case of the Assessee which culminated into passing of the Assessment Order, dated 02/02/2023 whereby, inter alia, following additions was made by the Assessing Officer based on the jottings/notings found in the diaries seized from the residence of PMS – Addition of INR.33,50,000/- under Section 69C of the Act being unexplained expenditure representing the net incremental negative peak balance of the ledger accounts in the name of ‘Dimple Manoj New A/c & Dimple M. Sanghvi A/c’.
4. In appeal before the Learned CIT(A), it was submitted by the Assessee that the above addition be deleted as the ledger accounts represented cash given to her as a housewife for safe keeping. However, the Learned CIT(A) rejected the aforesaid contention; declined to grant any relief on this issue; and confirmed the addition.
5. Being aggrieved the Assessee has preferred the present appeal before this Tribunal on the grounds reproduced in paragraph 2 above.
6. The Learned Authorised Representative for the Assessee contended that identical addition were made by the Assessing Officer in the hands of the Assessee for the Assessment Year 2013-2014, 2017-2018 and 2020-2021 in identical facts and circumstances. The first appellate authority dismissed the appeal of the Assessee. However, in appeal the Co-ordinate Bench of the Tribunal granted relief to the Assessee vide Common Order, dated 29/04/2026, passed in the case of the Assessee in ITA No.1376 to 1381/AHD/2024. Therefore, the issue raised in the present appeal stood decided in favor of the Assessee.
7. Per Contra the Learned Departmental Representative placed reliance upon the order passed by the Assessing Officer and the Learned CIT(A). However, the Learned Departmental Representative failed to bring on record any material to distinguish the above decision of the Tribunal in the case of the Assessee cited on behalf of the Assessee either on the facts or in law.
8. We have given thoughtful consideration to the rival submission and have perused the material on record including the judicial precedents cited during the course of hearing.
Ground No. 3
9. Ground No. 3 raised by the Assessee is directed against the addition of INR.33,50,000/- made by the Assessing Officer on account of alleged unexplained expenditure under Section 69C of the Act which was confirmed by the Learned CIT(A). The aforesaid addition was made by the Assessing Officer on the basis of entries in the ledger ‘Dimple Manoj New A/c & Dimple M. Sanghvi A/c’ appearing in the diaries seized from the residential premises of the father-in-law of the Assessee. On perusal of paragraph 9 to 15.1 of the Common Order, dated 29/04/2026, passed in the case of the Assessee in ITA No.1376 to 1381/AHD/2024 pertaining to Assessment Year 2013-2014, 2017-2018 and 2020-2021, we find that the Tribunal had set-aside identical additions made under Section 69C of the Act for the Assessment Year 2013-2014 holding as under:
“13. Regarding Ground No.3 addition of Rs.27,00,000/- made by the AO under section 69C of the Act on account of unexplained expenditure based on noting in loose papers seized from the premises of PMS. Ld AR submitted that the ledger represents amounts given by PMS to the assessee/DMS for safe keeping and returned by DMS, which have been noted in assessee’s account merely for the purpose of maintaining a record of how and when the said amounts were returned. The assessee/DMS is a housewife and stays with her husband and Shri Prakash M Sanghvi is her father-in-law residing in the same Bungalow. PMS would keep the cash at home and whenever such cash, kept by DMS at home, was received back by him from DMS (since the Assessee stayed in the same bungalow), the entry for receipt was noted under the assessee’s name only for record purposes. The same by no stretch of imagination can imply that the assessee/DMS gave her own money to PMS. It may be noted that the Assessee/DMS does not have any independent source of income and is a housewife. Thus, the only source for amount returned to PMS is the amounts given by PMS to the assessee at home for safe keeping.
13.1. The details of amounts withdrawn by PMS were already submitted during the course of hearing. The withdrawals by PMS are more than sufficient to cover the amounts returned by the assessee/DMS. In view of the above facts, Ld. AR requested that telescoping benefit may kindly be granted in respect of the alleged transactions, as the withdrawals made by PMS and given to the assessee/DMS for safe keeping and returned by the assessee represent the amounts recorded in her ledger as follows:
| Financial Year |
Annexure No. |
Page No. | Withdrawals (Rs.) |
Cumulative Withdrawals |
| xx | xx | xx | xx | xx |
| 2012-2013 | A-4 | 70 | 36,30,937/- | 1,16,36,392/- |
| xx | xx | xx | xx | xx |
14. Per contra, Ld CIT-DR, Shri AlpeshParmar appearing for the Revenue supported the orders passed by the Lower Authorities and requested to confirm the addition made on unexplained expenses u/s. 69C of the Act.
15. Heard rival submissions and perused materials available on record. It is undisputed fact that the assessee is the daughter-inlaw of Prakash M Sanghvi residing in the same bungalow with her husband and PMS. It is normal practice in the joint family system, cash brought into the home is handed over to the home-maker of the family. Further the Assessee/DMS do not have any independent source of income and is a housewife and home maker. Thus, the submission of the entry for receipt was noted under the assessee’s name only for record purposes and the same by no stretch of imagination can imply that the assessee/DMS gave her own money to PMS. We find force in the argument of the Ld AR of the assessee, further the entry for receipt was noted under the assessee’s name only for record purposes. The same by no stretch of imagination can imply that the assessee/DMS gave her own money to PMS. Furthermore, the withdrawals by PMS are more than sufficient to cover the amounts returned by the assessee/DMS. In view of the above circumstances, we deem it fit to set aside this issue to the file of the Ld AO and direct him to give telescoping benefit in respect of the alleged transactions, as the withdrawals made by PMS and given to the assessee/DMS for safe keeping and returned by the assessee represent the amounts recorded in her ledger.
15.1. In the result the appeals filed by the assessee in ITA Nos.1376 to 1381/Ahd/2024 for the Asst. Years 2013-14 to 2017-18 and 2021-22 are allowed for statistical purpose.” (Emphasis Supplied)
10. On perusal of the above, we find that the Tribunal had, after taking note of the fact that the withdrawals made by PMS were sufficient to cover amount under consideration, set-aside the addition and had restored the issue to the file of the Learned Assessing Officer with a direction to grant the benefit of telescoping. Since the factual matrix as well as the seized material for the relevant Assessment Year 2012-2013 are identical to Assessment Year 2013-2014, the above decision of the Co-ordinate Bench of the Tribunal in the case of Assessee would apply to present appeal. The Assessee had furnished year-wise cash withdrawals made by PMS as per the seized diaries are as under:
| Financial Year | Annexure No. | Page No. | Withdrawals (INR.) |
Cumulative Withdrawals (INR.) |
|---|---|---|---|---|
| 2009-10 | A-1 | 53 | 19,24,263 | 19,24,263 |
| 2010-11 | A-2 | 52 | 29,58,750 | 48,83,013 |
| 2011-12 | A-3 | 45 | 31,22,442 | 80,05,455 |
| 2012-13 | A-4 | 70 | 36,30,937 | 1,16,36,392 |
| 2013-14 | A-5 | 56 | 54,20,710 | 1,70,57,102 |
| 2014-15 | A-6 | 73 | 38,36,520 | 2,08,92,622 |
| 2015-16 | A-7 | 74 | 42,48,327 | 2,51,41,949 |
| 2016-17 | A-8 | 77 | 58,63,243 | 3,10,05,192 |
| 2017-18 | A-9 | 66 | 53,35,115 | 3,63,40,307 |
| 2018-19 | A-10 | 70 | 60,42,728 | 4,23,83,035 |
| 2019-20 | A-11 | 59 | 1,76,87,758 | 6,00,70,793 |
| 2020-21 | A-12 | 61 | 71,76,261 | 6,72,47,054 |
| Total Withdrawals | 6,72,47,054 | 6,72,47,054 | ||
11. It was contended on behalf of the Assessee that in case the benefit of telescoping in granted to the Assessee (as per the above decision of the Co-ordinate Bench of the Tribunal), no addition would be warranted since the cash withdrawals made by PMS along with the opening balance of cash-in-hand was sufficient to cover the amounts returned by the Assessee. On perusal of material on record we find merit in the aforesaid contention. Therefore, consistent with the view taken by the Tribunal in the case of the Assessee in appeals for the Assessment Years 2013-2014, 2017-2018 and 2020-2021 vide Common Order, dated 29/04/2026, passed in ITA No.1376 to 1381/AHD/2024, vide Common Order, dated 29/04/2026, we hold that the benefit of telescoping be granted in respect of the alleged transactions of cash withdrawals made by PMS and given to the Assessee we well as cash returned by the Assessee (recorded in the ledger/notings). As per the computation furnished by the Learned Authorised Representative for the Assessee, the cash withdrawals made by PMS along with the opening balance of cash-in-hand are sufficient to cover the amount so determined. Therefore, accepting the contention of the Assessee, we delete the addition of INR.33,50,000/- made by the Assessing Officer under Section 69C of the Act. Accordingly, Ground No. 3 raised by the Assessee is allowed.
Ground No.1 & 2
12. Ground No.1 and 2 raised by the Assessee challenging the validity of reassessment proceedings are dismissed as not pressed in view of the statement given by the Learned Authorised Representative for the Assessee during the course of hearing
Ground No.4 & 5
13. Since we have allowed Ground No.3 raised by the Assessee and have deleted the addition on merits, Ground No.4 and 5 raised by the Assessee are dismissed as having been rendered infructuous.
14. In result, the appeal preferred by the Assessee is partly allowed.
Order pronounced on 11.09.2026
