Jaipur ITAT Deletes Section 69A Addition Based on Uncorroborated Mobile Slips

Jadau Jewellers & MFG Private Limited Vs ACIT (ITAT Jaipur)

Section 292C Cannot Fill the Gaps in Loose Notings: Ownership and Financial Year Must Be Proved for Section 69A

Background of the Dispute

The assessee, engaged in manufacturing and trading jewellery, filed its return declaring a loss of ₹81,61,434. During a survey conducted on 9 December 2020, data was extracted from the backup of an Apple iPhone belonging to director Shri Prateek Kothari.

The Department found images of two handwritten slips and initiated reassessment. The AO treated their aggregate amount of ₹3,51,000 as money received by the company during FY 2019–20.

The assessee disputed the connection between the notings and its business. It sought particulars identifying the mobile backup, relevant statements, payer and material establishing receipt by the company.

The AO relied on the director’s possession of the images, initials appearing on the slips and the heading “Trimurti Circle”, where the company’s showroom was situated. Invoking section 292C, he added ₹3,51,000 under section 69A and applied section 115BBE. The CIT(A) confirmed the addition.

Ownership and Financial Year Are Foundational Facts

The Tribunal examined the merits first. It held that section 69A operates when the assessee is found to be the owner of money in a particular financial year, subject to the remaining statutory requirements.

Ownership and the relevant year are foundational facts. The burden of explaining the nature and source shifts to the assessee only after these facts are established.

The provision deems income in “such financial year”. Its fiction cannot be extended beyond the facts supporting its application.

Here, the entire addition rested on two slips, without other material establishing that the company owned or received the amounts in FY 2019–20.

Presumption Cannot Insert What a Document Does Not Say

The Tribunal explained that the expression “may be presumed” in section 292C creates a discretionary and rebuttable presumption.

More significantly, the presumption can lend credibility to the document’s contents; it cannot add missing particulars.

Even accepting the slips as true, they contained figures, dates, initials and, in one slip, the word “cash”. They did not identify who paid, who received, the transaction’s purpose or receipt by the assessee company.

The Tribunal emphasised that documents must be read for what they state, rather than what the Department suspects they mean. Section 292C could not supply the missing connection between the notings and taxable receipts.

One Slip Belonged to Another Year; the Other Mentioned None

The first slip contained four entries totalling ₹1,71,000, dated between 2 November and 14 November 2020.

These dates fell in FY 2020–21, relevant to AY 2021–22, rather than the year under appeal. If the AO presumed the contents true, he necessarily had to recognise those dates. Neither authority below had noticed this discrepancy.

The second slip totalled ₹1,80,000 and mentioned days and months, but no year. The AO provided no reason for assigning those transactions to FY 2019–20.

Thus, the first slip affirmatively indicated another financial year, while the second lacked evidence establishing any particular year.

Digital Integrity Did Not Establish the Transaction’s Meaning

The Revenue furnished a Cellebrite extraction report, a digital-evidence collection form recording the backup’s hash value and image printouts.

The Tribunal distinguished authenticity of the images from proof of the alleged transactions. Cloning and hash values established absence of tampering; they did not explain the notings or prove company receipts.

The heading “Trimurti Circle” merely indicated a location. The signatory remained unidentified, handwriting was not compared and no explanatory statement was recorded.

Further, the evidence collection form named “Kothari Jewels” and another premises. The authorities had not explained the connection to this assessee, as distinct from that concern or the director personally.

No corresponding cash, asset or unrecorded stock was found. The claim that entries were absent from the books also lacked a recorded examination supporting it.

Addition Deleted; Other Legal Questions Left Open

Referring to Common Cause v. Union of India, CBI v. V.C. Shukla and Umacharan Shaw & Bros. v. CIT, the Tribunal stressed the limited weight of uncorroborated loose notings and that suspicion cannot replace proof.

It deleted the entire ₹3,51,000 addition. The section 115BBE ground became infructuous. Challenges concerning reopening, issuance of notice by the jurisdictional AO and the section 65B certificate were left open. The appeal was allowed outright.

Author’s Comments

The decision’s strength lies in examining the actual slips rather than allowing forensic terminology to substitute for proof. An untampered image may still record an unidentified transaction.

Section 292C remains relevant, but its presumption must operate within the document’s contents. If dates are relied upon as genuine, inconvenient dates cannot be ignored.

The ruling does not establish that every loose sheet is worthless or that every electronic record requires a section 65B certificate in tax proceedings. Relief followed the failure to establish ownership, company nexus and the relevant financial year. The certificate question was expressly undecided.

Cases Discussed

• Common Cause (A Registered Society) Vs Union of India (Supreme Court) — [2017] 394 ITR 220 (SC). Relied upon concerning the evidentiary value of loose sheets, informal records and the need for corroboration.
• Anvar P.V. Vs P.K. Basheer and Others (Supreme Court) — (2014) 10 SCC 473. Cited by the assessee in its grounds concerning the requirement of a certificate under section 65B of the Indian Evidence Act, 1872. The Tribunal expressly left this legal ground unadjudicated.
• CBI Vs V.C. Shukla (Supreme Court) — (1998) 3 SCC 410. Discussed through the Supreme Court’s observations in Common Cause concerning loose sheets and their evidentiary limitations.
• Umacharan Shaw & Bros. Vs CIT (Supreme Court) — [1959] 37 ITR 271 (SC). Relied upon for the settled principle that suspicion cannot take the place of proof.

FULL TEXT OF THE ORIGINAL ORDER OF ITAT JAIPUR

1. This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-4, Jaipur [hereinafter referred to as “the learned CIT(A)”] dated 19.11.2025 arising out of the assessment order dated 19.03.2025 passed by the Assistant Commissioner of Income Tax, Central Circle-3, Jaipur (hereinafter referred to as “the AO”) under section 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2020-21.

2. The grounds of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 read as under:

1. In the facts and circumstances of the case the Learned CIT(A) has erred confirming the action of the learned AO in passing the order u/s 147 of the Income Tax Act, 1961 which is void ab-initio deserves to be quashed.

2. In the facts and in the circumstances of the case and in law, the Learned Assessing Officer, Dhara Singh Meena, Assistant Commissioner of Income Tax, Central Circle-3, Jaipur, Jurisdictional Assessing Officer (JAO) has erred in issuing notice u/s 148 on 30/03/2024 whereas after 29/03/2022, notice u/s 148 could have been issued by N.F.A.C.

3. In the facts and circumstances of the case of the Learned Assessing Officer has erred in non-compliance of Section 65(B) of the Indian Evidence Act renders the document inadmissible in the eye of law as held by the Supreme Court in the judgment reported in Anvar P.V vs. P.K.Basheer and others reported in (2014) 10 SCC 473 and the penalty is based only on electronic data/pen drive found during the course of search.

4. In the facts and circumstances of the case the Learned CIT(A) has erred confirming the addition of Rs. 3,51,000/- made by the learned AO u/s 69A of the I.T. Act, 1961 on account of alleged transaction.

5. In the facts and circumstances of the case the Learned CIT(A) has erred confirming the action of the learned AO in applying the provisions of section 115BBE of the Income Tax Act, 1961.

6. The assessee craves your indulgence to add amend or alter all or any ground(s) of appeal before or at the time of hearing.

3. Briefly stated, the facts of the case are that the assessee is a private limited company engaged in the manufacture and trade of jewellery. It filed its return of income for the year under consideration on 15.01.2021 declaring a loss of Rs 81,61,434. A survey under section 133A of the Act was carried out on 09.12.2020. In the course of the survey, data was extracted from the backup of the Apple iPhone 6 of Shri Prateek Kothari, a director of the assessee company. On the basis of two images of handwritten slips found in that data, the AO issued a show cause notice under section 148A(b) of the Act on 18.03.2024, passed an order under section 148A(d) of the Act on 28.03.2024 with the approval of the Pr. Commissioner of Income Tax (Central), Rajasthan, Jaipur, and issued a notice under section 148 of the Act on 30.03.2024. In response, the assessee filed its return on 02.04.2024 declaring the same loss.

4. In the reassessment proceedings, the AO held that the two slips showed that the assessee had received Rs 3,51,000 during F.Y. 2019-20. The assessee replied that the slips were rough notings bearing no year, no name of any person and no other particulars. It asked the AO to furnish (i) the mobile number from which the backup was taken and its owner, (ii) any statement recorded during the survey on the backup, and (iii) the material on the basis of which the AO concluded that the amount was received by the assessee company, and from whom. The AO did not accept the explanation. He relied on three circumstances, namely, that the images were found in the mobile backup of a director, that the slips were “duly signed by a person”, and that one slip carried the words “Trimurty Circle” at the top, where the showroom of the assessee is situated. Invoking the presumption under section 292C of the Act, the AO treated Rs 3,51,000 as unexplained money under section 69A of the Act, taxed it under section 115BBE of the Act and assessed the total income at Rs 3,51,000.

5. Before the learned CIT(A), the assessee challenged the reopening, the admissibility of the electronic data in the absence of a certificate under section 65B of the Indian Evidence Act, 1872, and the addition on merits. The learned CIT(A) dismissed the appeal. He held that the reopening rested on tangible material emanating from the survey; that section 65B of the Indian Evidence Act, 1872 does not govern income tax proceedings; that the presumption under section 292C of the Act applied because the data came from the mobile backup of the director; that the integrity of the data stood safeguarded by cloning and hash values; and that the assessee had failed to reconcile the entries with its books of account or to rebut the presumption.

6. The learned Authorised Representative (hereinafter referred to as “the learned AR”) reiterated the submissions made before the lower authorities and relied on the paper book of 30 pages containing the return of income with computation, the reply dated 24.01.2025 filed before the AO and the submissions made before the learned CIT(A). It was submitted that the slips are dumb documents; that they do not mention the name of the payer, the mode or purpose of any receipt, or the year; that no statement of the director or of any other person was recorded to explain them; that no cash, asset or corresponding entry was found; and that the specific queries raised before the AO remained unanswered. It was urged that section 69A of the Act applies only where the assessee is found to be the owner of money in the relevant year, which the Revenue had not established. The legal grounds on the validity of the reopening, the issue of the notice under section 148 of the Act by the jurisdictional AO and the admissibility of the electronic record were also pressed.

7. The learned Departmental Representative (hereinafter referred to as “the learned DR”) relied on the orders of the lower authorities. The learned DR also placed reliance on the factual report dated 05.08.2026 of the ACIT, Central Circle-3, Jaipur, forwarded by the Sr. DR on 06.08.2026 in compliance with the directions of the Bench. The report encloses the Cellebrite extraction report dated 09.12.2020, the Digital Evidence Collection Form recording the SHA hash value of the backup, and printouts of the two images (image_6854.jpg and image_6852.jpg) found in the Apple iPhone 6 belonging to Shri Prateek Kothari. It was submitted that the integrity of the data is established, that the presumption under section 292C of the Act applies with full force, and that the assessee did not discharge the burden of explaining the entries.

8. We have heard both the parties and perused the material on record, including the paper book and the factual report. The addition of Rs 3,51,000 under section 69A of the Act, challenged in Ground No. 4, goes to the root of the matter. We therefore take it up first.

9. The entire addition rests on the two slips. No other material was found or gathered. The printouts enclosed with the factual report are legible, and their contents are summarised below:

10. Section 69A of the Act reads as under:

“69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

The section is a deeming provision. It is triggered only when the assessee “is found to be the owner” of money “in any financial year”. Both conditions are foundational facts. The burden to explain the nature and source of the money shifts to the assessee only after these facts are established. The deeming also attaches to “such financial year”, that is, the year in which ownership is found. A deeming fiction cannot be stretched beyond the facts on which it is built.

11. The AO and the learned CIT(A) have filled this gap with the presumption under section 292C(1) of the Act, the relevant part of which reads:

“(1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 or survey under section 133A, it may, in any proceeding under this Act, be presumed—

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true; …”

The presumption is expressed in the words “may be presumed”. It is discretionary and rebuttable. More importantly, it can only lend truth to what a document says. It cannot add to the document what it does not say. Even if the contents of the two slips are taken as true, they record figures, dates, the word “cash” and an initial. They do not say who paid, who received, on what account, or that any sum was received by the assessee company. A document must be read for what it states, and not for what one suspects it means.

12. The question of the year is decisive at least for Slip A. Every entry on it is dated in November 2020 (2/11/20 to 14/11/20), less than a month before the survey. If the contents of the slip are presumed to be true, as the AO himself insists under section 292C of the Act, then these transactions belong to F.Y. 2020-21, relevant to A.Y. 2021-22. They cannot, on the AO’s own premise, be deemed to be income of F.Y. 2019-20. Neither the AO nor the learned CIT(A) noticed the dates written on the slip. The sum of Rs 1,71,000 is thus outside the year under appeal in any event. Slip B carries day and month but no year. The AO has given no reason for placing it in F.Y. 2019-20. The finding as to the year, which section 69A of the Act makes essential, is therefore wholly absent for Slip B as well.

13. The nexus with the assessee is also not established. The heading “Trimurti Circle” on Slip B at most refers to a location. It does not show that the amounts were received by the company that has a showroom there. The AO records that the slips were signed “by a person”, but the signatory is not identified. There was no comparison of handwriting and no statement of Shri Prateek Kothari or of anyone else on these slips, either during the survey or in the reassessment proceedings. We also note that the Digital Evidence Collection Form enclosed with the factual report names “Kothari Jewels” as the assessee and “B-1, Govind Marg, Jaipur” as the premises. Neither order below explains how the images were connected to the assessee company, as distinct from that concern or from the director in his personal capacity. Nothing was found in the form of cash, asset or unrecorded stock. The books of account were not rejected.

14. The assessee had raised these very questions before the AO. They went unanswered. The learned CIT(A) observed that the entries were “not recorded in the regular books”. However, the assessment order contains no finding that the books were examined against the entries, and that observation has no support in the record. The reliance of the learned CIT(A) on cloning and hash values answers a different question. It establishes that the images were not tampered with. It does not establish what the images mean. The integrity of the images is not in doubt before us. Their probative worth is.

15. On the evidentiary value of such loose sheets, the Hon’ble Supreme Court in Common Cause (A Registered Society) v. Union of India [2017] 394 ITR 220 (SC), after considering its earlier decision in CBI v. V.C. Shukla (1998) 3 SCC 410, observed at paragraph 20 as under:

“It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value.”

We are conscious that these observations were made under the Indian Evidence Act, 1872, and that income tax authorities are not bound by its technical rules. The underlying principle, however, is one of common sense and fair assessment. Uncorroborated loose notings carry little weight by themselves. That principle applies with greater force where, as here, the notings do not even name the parties. It is also settled since Umacharan Shaw & Bros. v. CIT [1959] 37 ITR 271 (SC) that suspicion, however strong, cannot take the place of proof.

16. In the present case the AO was required to establish, at the least, that the assessee was the owner of the money in F.Y. 2019-20. For Slip A the document itself points to a different year. For Slip B there is no year at all. For both slips there is no evidence that the money was received by the assessee company. The circumstances relied upon by the AO raise a suspicion, but no more. The foundational facts of section 69A of the Act are not proved, and the presumption under section 292C of the Act cannot supply them.

17. Accordingly, the addition of Rs 3,51,000 made under section 69A of the Act and confirmed by the learned CIT(A) is deleted. Ground No. 4 is allowed. As the addition no longer survives, Ground No. 5 relating to the application of section 115BBE of the Act becomes infructuous.

18. Since the assessee succeeds on merits, the legal grounds become academic. Ground No. 1 on the validity of the reopening, Ground No. 2 on the issue of the notice under section 148 of the Act by the jurisdictional AO instead of the National Faceless Assessment Centre, and Ground No. 3 on the requirement of a certificate under section 65B of the Indian Evidence Act, 1872 are, therefore, not adjudicated and are left open. Ground No. 6 is general in nature and needs no adjudication.

19. In the result, the appeal filed by the Assessee is allowed.

Order pronounced in the open court on 08.10.2026