DCIT Vs Prateek Chitkara (ITAT Delhi)
The Delhi Bench of the ITAT has upheld the CIT(A)’s detailed factual examination of diaries seized during a search and rejected the Revenue’s attempt to attribute every entry exclusively to the assessee. The Tribunal held that the seized material itself demonstrated that the cash committees were jointly organised by the assessee and another person. It accordingly upheld the equal apportionment of the amounts between the two organisers and sustained the drastic reduction of the addition for AY 2019-20 from ₹63.06 crore to ₹1.78 crore.
A survey operation was conducted at the business premises of M/s Dengen Products India LLP, in which the assessee, Mr. Prateek Chitkara, was a partner. During the survey, certain documents considered incriminating were found. The survey was consequently converted into a search and a warrant of authorisation was executed on 08-12-2018.
During the search, ten diaries marked as Annexures A-1 to A-10 were seized. These diaries contained entries indicating substantial receipts and payments in cash. Although the assessee was not present at the premises, one of his employees, Mr. Shiv, was present. In statements recorded u/s 132(4) and subsequently u/s 131(1A), the employee stated that the diaries contained details of receipts and payments relating to cash committees operated from the assessee’s premises at Karol Bagh.
Based upon the diaries and the statements, the AO concluded that the entire cash-committee activity belonged to the assessee. For AY 2019-20, an addition of ₹63,06,73,258 was made. A further addition of ₹1,34,48,318 was made for AY 2017-18. The additions were described as unexplained investment or unexplained receipts arising from the seized material.
Before the CIT(A), the central controversy was whether the assessee was the sole organiser of the cash committees, whether he jointly operated them with Mr. Harpreet Singh Talwar, or whether he was not involved in the activity at all.
The CIT(A) examined the ten seized diaries, the statements and the working pattern of the cash committees. In such committees, several participants contribute a fixed amount every month. The pooled amount is then allotted to the successful bidder. The organiser is ordinarily compensated by receiving the right to take the second or third monthly draw without suffering any deduction or competitive bidding. Therefore, the person availing the preferential second or third draw is a strong indicator of the identity of the organiser.
On examining the seized diaries, the CIT(A) found that the preferential draw was not invariably taken by the assessee. In different committees, the second or third draw was availed either by the assessee or by Mr. Harpreet Singh Talwar. This pattern constituted significant internal evidence that the assessee was not the sole organiser and that the activity was jointly carried on by both persons.
This conclusion was also supported by the AO’s own notice u/s 142(1), which had referred to the committees as being run by the assessee along with Mr. Talwar. Further, several persons identified from the diaries were recorded as being “care of Harpreet Singh Talwar.” An FIR produced by the assessee also linked certain disputed persons with Mr. Talwar.
The CIT(A) therefore concluded that the assessee and Mr. Talwar were co-organisers and equal partners in the cash-committee activity. Accordingly, any amount ultimately attributable to the organisers had to be apportioned equally between them.
The CIT(A) then examined the AO’s computation of ₹63.06 crore. The AO had attributed very large amounts to three allegedly unidentified persons—Mr. Sachiv Batra, Mr. Aman Arora & Mr. Raman Arora. However, after physically examining the diaries and reconciling the entries with the assessee’s tabulation, the CIT(A) found that the amounts of ₹14.50 lakh, ₹31.53 crore & ₹17.02 crore attributed by the AO to these persons did not emerge from the seized diaries.
The correct amount capable of being considered from the seized material was only ₹3,57,16,400, and not ₹63,06,73,258. In the case of Mr. Sachiv Batra, summons had been duly served, though he did not respond. More importantly, no amount was found recorded as having been received from him during AY 2019-20. Therefore, there was no factual basis for an addition relating to him.
As regards Mr. Aman Arora and Mr. Raman Arora, the CIT(A) found that the assessee had not produced adequate independent evidence of their identity, apart from the FIR. The summons issued to them had also remained unserved. Some addition was, therefore, considered justified in relation to the relevant entries.
However, since the committee activity was jointly organised by the assessee and Mr. Talwar, only one-half of ₹3,57,16,400 could be attributed to the assessee. The CIT(A) accordingly sustained ₹1,78,58,200 in the assessee’s hands and directed that the equal balance be assessed in the hands of Mr. Talwar. The AO happened to have jurisdiction over both organisers.
The Revenue challenged this relief before the ITAT. It contended that the assessee had failed to produce confirmations, financial statements or verifiable evidence establishing the identity and creditworthiness of the contributors and genuineness of the transactions. It further relied upon the statutory presumption u/s 292C, arguing that documents found at the searched premises were presumed to belong to the assessee unless the contrary was proved.
The ITAT rejected the Revenue’s arguments. It found that the CIT(A) had passed a detailed and well-reasoned order after examining the seized diaries themselves. The reduction in quantum was based on the finding that the massive amounts adopted by the AO were not reflected in the seized material. Similarly, equal apportionment between the two organisers flowed from the internal contents of the diaries and the pattern of preferential draws.
The Tribunal held that the CIT(A)’s findings did not warrant interference and upheld them in full. Since the factual position for AY 2017-18 was similar, the same conclusion was applied to that year. Both Revenue appeals were dismissed.
Author’s Comments
The ruling demonstrates that the presumption u/s 292C is powerful but not a licence to make additions disconnected from the contents of seized material. A seized diary may be presumed to belong to the searched person, but the quantum, ownership and legal consequences of its entries must still be determined through careful examination.
The CIT(A) did not grant relief merely on the assessee’s denial. He studied the operational pattern of the committees, identified who received the preferential organiser’s draw and reconciled the actual entries. That exercise revealed both an inflated computation and joint control of the activity.
The broader principle is simple: search material must be interpreted as a whole. The Revenue cannot rely upon a diary to make an addition while ignoring those very entries which show that another person jointly conducted the activity. Presumption may begin the inquiry, but it cannot replace fact-finding.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This is a batch of two appeals pertaining to the same assessee and since the facts are similar in both the cases, we deem it fit to pass a common order. It may be mentioned that on the last date of hearing, none attended on behalf of the assessee but it was decided to continue with the hearing with the help of Ld. DR, more so because it was Revenue’s appeal.
2. ITA No.4138 arises from order dated 28.03.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A)-31, Delhi. ITA 4139 arises from order dated 28.03.2025, passed u/s 250 of the Act, by Ld. CIT(A)-31, Delhi.
2.1 The facts need to be briefly captured for appreciating the grievance of the Revenue. It is seen that a survey operation was carried out at the business premises of M/s Dengen Products India LLP, in which the assessee is a partner. During the survey proceedings, various allegedly incriminating documents were found on the basis of which the survey was converted into a search operation and warrant of authorization was executed on 08.12.2018. During the course of this search, ten diaries marked from Annexure A-1 to A-10 were seized and there was indication of substantial receipts and payments in cash. The assessee was not present at the said premises but his employee, one Mr. Shiv, was present and during the course of a statement recorded u/s 132(4) of the Act and subsequent statement u/s 131(1A) of the Act, he admitted that he was an employee of the assessee and that the diaries contained entries of receipts and payments of cash committees organized and run from the assessee’s premises at Karol Bagh.
2.2 The Ld. AO added Rs.63,06,73,258/- for AY 2019-20 in the hands of the assessee and Rs.134,48,318/- for AY 2017-18 as unexplained investment of the assessee.
2.3 The aggrieved assessee approached the CIT(A) where he could succeed to the extent that it could be factually established that there were two organizers of the committees and hence the undisclosed amounts determinable from the seized material were to be apportioned equally between the two persons. For the sake of reference, the relevant findings of the Ld. CIT(A) for AY 2019-20 (which will be taken as the lead case) deserve to be extracted:
“25. The factual issue to be determined in appeal therefore, is whether the appellant was sole organizer of the cash committees, or not. There are three possible alternatives:
a. The appellant was sole organizer of the cash committees.
b. The appellant was joint organizer of the cash committees along with Harpreet Singh Talwar, or
c. The appellant was not involved in organization of the cash committees.”
………………..
“27. This leaves the first two alternatives. Given that the appellant has taken contrary stands, and given that the assessment in this case is a post- search assessment, the conclusions are best calibrated to material found during search. This leaves us with Shri Shiv’s statements and the seized notebooks, which have been carefully perused, and found to be in the nature of memoranda accounts. As per the AO, and from what is found to be the prevalent practice in cash committees, the organizer is compensated by getting the right to avail 2nd or 3rd draw from the committee without any deduction or counter-bidding. For instance, if a committee has 15 participants, and a value of Rs.30 lakhs, each participant will contribute Rs.2 lakhs each month. The said amount of Rs.30 lakhs as thus collected each month, would be subject to bidding, and the person agreeing to take the lowest amount would be awarded the amount. The surplus would be carried forward to the next month. In such activity, the organizer would get to avail the total amount of Rs.30 lakhs in the second or third month, without any deduction. That is both, the organizer’s yield from the activity, as well as in a case such as thus, the surest sign of who the organizer is.
“28. Upon careful perusal of the cash committees, as recorded in the seized diaries. I find that in each case, the 2nd or 3rd draw from each committee has been availed either by the appellant or by Shri Harpreet Singh Talwar. It is not as if the appellant was solely availing the same. Details thereof are as under:
……
“29. The appellant is thus right in contending that 2nd or 3rd draw from each committee was availed either by him or by Shri Harpreet Singh Talwar. This is the surest sign that the appellant and Harpreet Singh Talwar were acting jointly in organizing the cash committees. The appellant’s other contentions in this regard, as to the AO himself having referred to cash committees being run by the appellant along with Shri Harpreet Singh Talwar in his notice u/s 142(1) dated 06.01.2021, and most persons having been identified by appellant from the diaries as ‘care of Harpreet Singh Talwar’, are all borne out of the record. With regard to the three persons held by the AO to be unidentified, copy of FIR filed by the appellant seeking to prove identity of Shri Aman Arora and Shri Raman Arora, link the two persons with Shri Harpreet Singh Talwar. In view thereof, the appellant is right in contending that he was no sole organizer of the cash committees, but working jointly with Shri Harpreet Singh Talwar.
“30. In view of the foregoing factual background, I find force in the contention of the appellant that he was not the sole organizer of the cash committees. Since the appellant was working jointly with Shri Harpreet Singh Talwar, the two may be treated as equal partners in organizing the cash committees and as such their co-organizers. Therefore, the contention of the appellant in this regard is accepted and accordingly Grounds 2, 3 and 4 may be treated as allowed.”
…………
“33. I have examined the contentions of the appellant on this issue, in the light of the AO’s findings, the seized material, and the material on record. First, the appellant’s contention as to amounts against the three individuals held by the AO to be unidentified, as emanating from the seized diaries and relatable to AY 2019-20, is found to be correct. The amounts identified against the three individuals by the AO – Shri Sachiv Batra (Rs.14,50,849), Shri Aman Arora (Rs.31,53,36,629) and Shir Raman Arora (Rs.17,02,81,780) are nowhere coming from the seized diaries. During the hearing of the appeal, I have gone through the diaries along with Counsel for the appellant, and have examined the contents of the amounts as tabulated by the appellant. They have been found to be correct. Therefore, in any event, the amount to be reckoned for the purpose of working out whether any addition is required to be made in respect of these parties as undisclosed income in the appellant hands, is an amount of Rs.3,57,16,400/- and not Rs.63,06,73,258/-.
34. With respect to the enquiries conducted by the AO with regard to the three persons held by him to be unidentified. It is found that summons sent by the AO to Shri Sachiv Batra were in fact served on him, though no response was entered by him before the AO. In any case, since there is in fact no amount noted as received from Shri Sachiv Batra during AY 2019- 20, there is no basis to make or sustain any addition in his case. In the case of Shri Aman Arora and Shri Raman Arora however, the appellant has not led any evidence except for the copy of FIR as produced before the AO. This cannot be held to be evidence of the said parties existence.
Admittedly, summons issued by the AO on these two individuals have not been served.
35. In any case, if the receipts in the hands of two of the persons stated to be participants in cash committees are to be added in the hands of the organizer of the said cash committees, only half the said sum would be assessable in the appellant’s hands, since it has been held in earlier part of this order that the appellant was organizing the cash committees along with Shri Harpreet Singh Talwar. In view of this holding, I find that since there are two organizers of the said committees, it would be appropriate to attribute equal amount of income to both the organizers. Therefore, I direct that a sum of Rs.1,78,58,200/- (half of Rs.3,57,16,400/-) be assessed in the appellant’s hands, and an equal amount be assessed in the hands of Shri Harpreet Singh Talwar. The AO, being the AO of both the organizers of the said committees, is directed accordingly. As a result, an addition of Rs.1,78,58,200/-, in place of the addition of Rs.63,06,73,258/- made by the AO, is sustained and confirmed in the hands of the appellant. To this extent, these grounds will be treated as partly allowed.”
2.4 The Revenue is aggrieved with this action and has approached the ITAT with following grounds of appeal (AY 2019-20):
1. “Whether the CIT(A) was justified in deleting the addition of Rs.63,06,73,258/- made under section 68, despite the assessee’s failure to produce confirmations, financial statements, or any verifiable evidence to establish the identity and creditworthiness of the alleged contributors and the genuineness of transactions?
2. Whether the CIT(A) was correct in relying on mere name and phone number details provided by the assessee as sufficient compliance under section 68, even though notices issued under section 131 to the alleged contributors (e.g., Sachiv Batra, Aman Arora, Raman Arora) were not complied with and remained unverified?
3. Whether the CIT(A) ignored the legal presumption under section 292C of the Income Tax Act, which mandates that seized documents from the assessee’s premises are presumed to belong to him and relate to his income unless proved otherwise?”
3. Before us the Ld. DR took us through the order of Ld. AO and pointed out that the documents seized during the premises at Karol Bagh indicated that the transactions had to pertain to the assessee only. It was argued that the Ld. AO has passed a detailed and factual order, after examining Annexure A-1 to A-10, and has rightly indicated the amounts to be added as unexplained investment in the hands of the assessee for both the years under consideration. The Ld. DR assailed the finding of Ld. CIT(A) in firstly reducing the quantum of addition and thereafter apportioning the undisclosed investment in the hands of the assessee and Shri Harpreet Singh Talwar equally.
4. We have considered the submissions of Ld. DR and have gone through the records before us. We find that the Ld. CIT(A) has passed a very detailed and reasoned order. We also find that the quantum of addition has been rightly reduced in instances where the seized material was not clearly indicative of ownership or even an attributable quantum. We also find that the apportionment of undisclosed investment between the assessee and Shri Harpree Singh Talwar has been rightly done on the basis of a detailed discussion in the impugned order. It may be mentioned that since the relevant findings have already been extracted (supra), we do not deem it necessary to repeat the same again. Needless to say, the finding of the Ld. CIT(A) do not deserve to be interfered with under any circumstances, and the same are upheld in full.
5. Since the factual matrix is the same for both the years, accordingly, for AY 2017-18 (ITA 4139) the decision rendered in ITA 4139 shall apply mutatis mutandis to this year also.
6. In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open court on 15.09.2026.
