Mere Third-Party Excel Sheets Cannot Sustain ₹27.85 Crore Tax Additions: ITAT Mumbai

ACIT Vs Kapadia Brothers (ITAT Mumbai)

SEO Title: Third-Party Excel Sheets Cannot Sustain ₹27.85 Crore Tax Additions: ITAT Mumbai

Summary: The Mumbai Bench of the Income Tax Appellate Tribunal considered the Revenue’s appeal and the assessee’s cross-objection concerning Assessment Year 2020-21. Kapadia Brothers, a partnership firm trading in readymade garments, was reassessed after a search at JM Jain LLP uncovered a parallel computer server and Excel records referring to “Moinbhai (Kapadia)”. The Assessing Officer relied on those third-party records and related statements to make additions for alleged unexplained purchases, commission and capital under Sections 69C and 69A of the Income-tax Act.

The assessee disputed the identification of the ledger entries with its business, maintained that recorded transactions were through banking channels, and sought the underlying electronic records and cross-examination of the persons whose statements were relied upon. The Commissioner (Appeals) deleted the additions, observing that the search presumptions could not automatically be applied to an unsearched third party, that independent corroboration was absent, and that the opportunity to challenge the evidence had been denied. The appellate order also addressed the absence of a certificate under Section 65B(4) for secondary electronic evidence.

The Tribunal found no reason to disturb the appellate findings. It relied on a coordinate-bench decision arising from the same JM Jain search, and referred to Din Dayal Jalan Textile Pvt. Ltd. v. ACIT, which similarly concerned unsupported third-party server entries. The Tribunal held that the Revenue had not established an assessee-specific financial trail, movement of cash or other independent evidence. It dismissed the Revenue’s appeal and allowed the assessee’s cross-objection by order pronounced on 13 July 2026.

Cases Discussed

• DCIT Vs Vikas Kumar Chhajer — ITA No. 212/Viz/2025, dated 25.07.2025 — Coordinate Bench decision concerning the JM Jain search.
• Andaman Timber Industries Vs Commissioner of Central Excise — (2015) 281 ELT 431 (SC), Civil Appeal No. 4228 of 2006 — Cross-examination and natural justice.
• Arjun Panditrao Khotkar Vs Kailash Kushanrao Gorantyal — [2020] 7 SCC 1 — Section 65B certificate for electronic evidence.
• Din Dayal Jalan Textile Pvt. Ltd. Vs ACIT — ITA No. 7676/Mum/2025, dated 16.02.2026 — Third-party information and corroboration.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI

This appeal filed by the Revenue and cross objection by the assessee are against the order of ld. CIT (A), National Faceless Appeal Centre (NFAC), vide order No. ITBA/NFAC/S/250/2025-AY 2020-21 26/1082716271(1), dated 18.11.2025, passed against the assessment order by Assistant Commissioner of Income Tax Circle 17(1), Mumbai, u/s. 147 of the Income-tax Act (hereinafter referred to as the “Act”), dated 24.03.2025, for Assessment Year 2020-21.

2. Grounds taken by the Revenue are reproduced as under:

1. Whether on the fact and in the circumstances of the case and in law, the Ld. CIT(А) erred in law in holding that the assessment order is infirm solely on the ground that the assessee was not granted opportunity to cross-examine third parties, despite the additions being based on seized evidence and not merely on oral statements?

2. Whether on the fact and in the circumstances of the case and in law, the Ld. CIT(A) misapplied the ratio of Andaman Timber Industries vs. CCE (SC) by treating non-grant of cross examination as fatal even when the additions were based on documentary electronic evidence?

3. Whether on the fact and in the circumstances of the case and in law, the Ld. CIT(A) exceeded his jurisdiction by declaring the assessment order infirm on procedural grounds, without examining the merits of additions made u/s 69C and 69A and ignoring that the said data was seized during a valid search u/s 132 and constitutes incriminating material?

4. Whether on the fact and in the circumstances of the case and in law, the Ld. CIT(A) was justified in law in deleting additions merely because the seized material belonged to a third party, without appreciating that the assessee failed to rebut the contents of such seized material?

2.1. Grounds taken by assessee in its cross objection are reproduced as under:

1. On the facts and in the circumstances of the case and in law, the initiation of the reassessment proceedings under section 147 of the Act is invalid and bad in law.

2. On the facts and in the circumstances of the case and in law, the addition of Rs. 7,71,13,428/-on account of unexplained purchases u/s 69C, addition of Rs.2,44,80,453/-on account of the alleged commission u/s 69C and the addition of Rs.17,69,09,072/- u/s 69A for the alleged unexplained capital and the department’s appeal against the same is misconceived and liable to be dismissed.

3. The appellant (Department) has made the entire addition based on certain excel sheets that were recovered from a computer server during the course of search and seizure operation conducted in respect of M/s J.M. Jain LLP on 28.05.2022.

4. The respondent/cross-objector was not granted any opportunity to cross examine the third parties from whose possession the excel sheets were found.

5. A presumption u/s 132(4A)/292C has been made which can be made only against the person in whose case the search was authorised and from whose possession, incriminating documents were found and seized. This presumption cannot be raised against the Respondent/cross-objector in the present case as he was not subjected to search and seizure operation, neither this excel sheets were recovered from its possession.

6. The Respondent/cross-objector on the other hand has consistently denied about the information retrieved from M/s J.M Jain Group and maintained that it was unaware of the transactions recorded in the parallel sets of books of accounts of the group.

7. The Ld. AO has erred without appreciating the submissions and evidences filed.

8. The order of the Ld AO is perverse, arbitrary, and against the principles of natural justice to the extent it sustained the additions, and the same is liable to be set aside.

9. It appears that in the absence of a Section 65B certificate, the electronic evidence relied on by the AO is inadmissible and additions based upon such material cannot be sustained.

10. The appellant (Department) has failed to establish any perversity or legal error in the order of CIT(A) granting relief to the Respondent/cross-objector.

11. It is undisputed that the Respondent/cross-objector’s books of account were produced, audit under Section 44AB was completed, books were not rejected u/s 145(3). Therefore, once the AO accepts the books as maintained, he cannot bypass them, substitute them, disregard entries without pointing out defects, or make additions on the basis of estimates.

12. The rotation theory is, thus, purely conjectural, devoid of legal backing or factual support.

3. Brief facts of the case are that assessee is a partnership firm set up vide partnership deed dated 01.11.2006 with three partners namely- a. Mr. Moin Yusuf Kapadia, b. Mr. Shahid Yusuf Kapadia, and c. Mrs. Shabina Zahid Kapadia

3.1. The partnership was reconstituted vide a supplementary Deed dated 01.04.2022 wherein Mr. Mohamed Naseeruden Shahid Kapadia,

AY 2020-21 Mr. Junaid Moin Kapadia, Mr. Sayam Zahid Kapadia and Mr. Mohamed Zafar Kapadia, who were minors were admitted for the benefit of the partnership and have now opted to become full-fledged partners with effect from 09.12.2021, for expansion and smooth running of the business. Assessee carries on business of readymade garments in the firm name and style of M/s Kapadia Brothers. (Mumbai) at 13, Sheriff Devji (Chakala) Street, Mumbai-400003. Assessee is also engaged in retail sale to various customers. These sales are across the counter and mainly in cash. The wholesale business is business to business sales (B2B sales). Assessee filed its return of income on 14.01.2021, reporting total income at Rs. 24,47,560/-.

3.2. Subsequently, a search u/s 132 of the Act was conducted at premises of M/s JM Jain, LLP on 28.05.2022. During the said search and seizure operation, incriminate material was found including a separate computer system (a Parallel Server) namely “JSK Server”. During course of search, a ledger account of one Moinbhai (Kapadia) Mumbai, Maharashtra was found in the said ‘parallel server’ of M/s JM Jain LLP and was assumed to be of the assessee. This parallel server was used to record transactions between vendors and customers, which included cheque payments (that were accounted for in the books of the vendors and customers) and the cash component (that was not accounted for in the books of accounts of the vendors and customers). The server, hence, recorded the unaccounted commission and interest income of JM Jain LLP on such transactions. The list of all the assessees (in an excel sheet) who had participated in cash transactions with or through M/s. JM Jain LLP (erstwhile M/s JM Jain, a proprietorship)/ the JM Jain group along with the associated ledgers was also shared by the Investigation wing. On perusal of this data, it was seen that name of the assessee was also present in the said excel sheet. On perusal of

3.3. In view of the above, ld. Assessing Officer was satisfied that books of accounts or documents seized u/s. 132 in case of M/s. JM Jain LLP (erstwhile M/s. JM Jain, a proprietorship) on or after 01.04.2021, contains therein an information related to the assessee. A notice u/s 148, dated 19.03.2024 was issued and duly served upon the assessee. Assessee filed ITR in response to notice u/s 148 on 12.06.2024 reporting same total income as in the original return viz. Rs. 24,47,560/-. Ld. Assessing Officer in the course of reassessment proceedings show-caused the assessee to explain the transaction as contained in the excel sheet noted in the name of the assessee and proposed to make the addition of Rs. 17,69,09,072/- as un-explained money u/s. 69A.

4. In this regard, assessee made detailed submissions to explain its case and strongly objected on the proposition made by the ld. Assessing Officer to make the addition. According to the assessee, in the seized documents, there is no clear mention of the name Kapadia Brothers. The only name mentioned is Moinbhai (Kapadia) Mumbai Maharashtra. Assessee stated that the same cannot be attributed to it as no specific mention is made of the name Kapadia Brothers. Thus, it is purely on the basis of assumption and guesswork. By not having the correct name of Kapadia Brothers, the identity is not established and thus is a case of wrong or mistaken identity and of assumption of identity which could be of some other person. Assessee further demonstrated that all the transactions with JM Jain LLP are transacted through proper banking channels, all the payments are recorded in the books of accounts and the payments made through proper banking channels can be easily traced and tracked by the Department. Thus, all transactions with JM Jain LLP are genuine and verifiable. Assessee further pointed out that inquires and investigation as mentioned in the show cause notice were not undertaken as there is no reference to any specific inquiry undertaken qua Kapadia Brothers. Assessee further explained that ld. Assessing Officer has not provided cogent information and details of the same and has remained silent.

4.1. Assessee in its contentions, further stated that –

a) Ld. Assessing Officer did not confront it the with details and exact amount attributable to Kapadia Brothers

b) If there was credible information, then no opportunity of cross examination was allowed

c) Assessee was not allowed to verify the details so collected and the opportunity to put forth the entire details to the person from whom the information was sourced

4.2. Assessee also submitted that the case of the department is based on search and seizure conducted under section 132 at the premises of JM Jain LLP. The material so seized without looking in to the actual factual matrix and without inquiry and without proper investigation but merely on the basis of surmise and conjecture has been attributed to the assessee. It is trite law that materials seized during search should be investigated and proper evidence should be established. In the present case, additions made are purely on assumptions and by working out hypothetical ratios which cannot be the basis of addition. According to the assessee, it is a failed attempt by the Department to relate the seized documents with the assessee only on the basis of noting of the name “Moin Bhai Kapadia Mumbai Maharashtra”. Thus, attributing a mere name in the ledger without corroborative material cannot lead to the addition proposed in the show cause notice.

4.3. Assessee also made specific requests for supply of copies of evidence recovered as well as of statements recorded in the course of search for rebuttal. According to the assessee, since ld. Assessing Officer has relied upon parallel server having separate computer system, the data collected from the parallel server should have been confronted to the assessees. It is asserted that no copies whatsoever of any material or data except ledger from parallel server has been given to the assessee. No opportunity for cross examination has also been provided which violates the principles of natural justice. Thus, contention of the assessee is that entire approach of the ld. Assessing Officer is based on surmises, conjectures and doubts and is devoid of evidence and direct nexus with the seized materials.

4.4. Ld. Assessing Officer, after considering the detailed submissions made by the assessee did not find convinced by the same. According to him, from the post-search investigation, it was found that the cheque transactions were recorded in the books of account by the customer/vendor parties. However, the cash transactions were not recorded by the customers/vendor parties in their books of accounts. For this, he drew conclusion from the statements recorded during the post-search investigation of various customers/vendor parties. This led him to draw the conclusion that cash transactions made by the customer/vendor parties remained unaccounted. He thus, proceeded to make the addition of Rs. 17,69,09,072/- as unaccounted capital used for making purchases out of the books from JM Jain LLP by applying formula of “capital ratio” on the turnover recorded in the books of accounts of the assessee vis-à-vis the unaccounted turnover. This addition is made as unexplained money by applying section 69A. In this regard, it is important to note that assessee had specifically asked for personal hearing for the purpose of clarification as well as to cross examine. However, ld. Assessing Officer recorded his observations that “cross examination is not an absolute right and depends not only on the circumstances of the case but also on the statute concerned.” He thus, denied the cross examination requested by the assessee.

4.5. Ld. Assessing Officer made further two additions in the hands of the assessee when completing the impugned re-assessment. He took the purchases of Rs.84,38,56,273/- by ignoring the decimal points as mentioned in the “JSK ledger of Moin Bhai (Kapadia)” made from M/s. JM Jain LLP for the period from 01.04.2019 to 31.03.2020. Assessee had accounted for and reported the purchases made from JM Jain LLP in the year under consideration of Rs.2,78,41,164/- for which ld. Assessing Officer gave a credit and applied GP ratio of 9.45% on the purchases obtained from the excel sheet, i.e., Rs.81,60,15,109/- (84,38,56,273 – 2,78,41,164). Ld. Assessing Officer adopted the GP ratio from the audited financial statements of the assessee, more particularly tax audit report in Form-3CD at point No.40, Sr. No. ‘b’. He added this amount as non-genuine purchases/expenses treating the same as un-explained expenditure u/s. 69C. It is worth noting the fact about finding arrived at by ld. Assessing Officer in this regard. He has applied GP ratio from the audited financial statement on the data taken by him from the excel sheet after giving credit for the accounted purchases to arrive at a figure of Rs.7,17,13,428/-. This amount has been treated as un-explained expenditure towards non-genuine purchases/expenses, though as per the computation mechanism adopted by the ld. Assessing Officer, it represents the “gross profit” on the alleged unaccounted purchases. This approach of the ld. Assessing Officer reflects inconsistency on the method adopted by him for computing the amount and giving the ultimate treatment while making the addition.

4.6. In furtherance to this, ld. Assessing Officer also alleged that a commission must have been paid by the assessee on the under-invoiced amounts in order to facilitate the out of books transactions for which the basis adopted is the statement of one Shri Satya Narayan, recorded during the course of search of JM Jain LLP. He thus, applied rate of 3% on the alleged purchase amount of Rs.81,60,15,109/- to arrive at a figure of Rs. 2,44,80,453/- towards this alleged commission paid by the assessee to JM Jain LLP, treating it as un-explained expenses u/s. 69C.

5. In the first appellate order, ld. CIT(A) has extensively dealt with each of the issues on which addition is made and the contention raised by the assessee backed by corroborative documentary evidence. Ld. CIT(A) has observed that the entire addition is done on certain excel sheets recovered from the computer server during the course of search and seizure operation conducted in the case of an unrelated party, i.e. JM Jain LLP. He notes that the additions made in the present case are based on evidence discovered from the premise of the third party or based on statements of the third party which ostensibly require adherence to principles of natural justice by granting opportunity to third parties and making available the evidence so discovered from the premise of the third party in the course of its search for rebuttal by the assessee. He notes that the presumption u/s. 292C r.w.s. 132(4A) can be drawn only against the person in whose case the search is authorised and from whose possession the incriminating documents and other evidences are discovered and seized. The presumption cannot be raised against the assessee who is not subjected to the search and seizure operation and neither the excel sheets recovered from its possession. On the inference drawn by the ld. Assessing Officer about certain abbreviations as to “JSK Server”, he notes that such an inference is drawn by placing reliance on the statement of one Shri Anil Swami, the accountant of the group in whose case search was conducted. Assessee has throughout the proceedings, pressed for providing opportunity to cross examine the persons whose statements have been relied upon but no such opportunity granted. Also, assessee could not corroborate its submission for want of material retrieved from the searched party. Also, he referred to the provisions of section 65B of the Evidence Act, 1872 in relation to the excel files which are electronic documents, since no certificate as required u/s. 65B(4) is brought on record for the admissibility of the secondary electronic evidence which forms the basis of making addition in the hands of the assessee. In the absence of such a certificate, the excel sheets used by the ld. Assessing Officer for the additions made, has no evidentiary value. In this regard, he relied upon the decision of the Hon’ble Supreme Court in the case of Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal [2020] 7 SCC 1 wherein it was held that “the requirement of producing the certificate u/s. 65B(4) is the condition precedent to the admissibility of secondary electronic evidence. Courts cannot admit such electronic records unless duly certified, even if the records are otherwise genuine.” Ld. CIT(A) further notes that ld. Assessing Officer could not establish possession of unaccounted money, incurrence of unaccounted expenditure and nexus between the assessee and the third party excel entries. Thus, the primary onus which lay on the ld. Assessing Officer remained unfulfilled. In this regard, he also takes note of the fact of books of accounts and audit report furnished by the assessee in the course of assessment which had been accepted.

5.1. He also referred to decision of Coordinate Bench, Vishakapatnam in the case of DCIT vs. Vikas Kumar Chhajer in ITA No. 212/Viz/2025 dated 25.07.2025 wherein identical controversy emanating from the very same search action conducted in the case of JM Jain LLP group had come up for consideration. In this case before the Coordinate Bench also, the additions were made on the very same nature of transaction based on excel sheets recovered from the computer server commonly referred as “JSK server”. Coordinate Bench after elaborate consideration of the factual background and the legal position came to a conclusion that ld. Assessing Officer had failed to place on record any documentary evidence which could irrefutably demonstrate that the cash deposits disclosed under the name of the assessee in the seized documents were the actual transactions carried out by the assessee. It also took note that there was a failure on the part of the authorities below of not allowing the assessee an opportunity of cross examining the third parties on whose statements adverse inferences were drawn, which is nothing but a flagrant violation of the basic tenets of principles of natural justice. The Coordinate Bench also took note of the fact that despite specific requests made by the assessee for supplying the copies of excel sheets and other material based on which addition has been made, no such material was made available to the assessee. The Coordinate Bench thus, concluded by holding that no infirmity is found in the view taken by the ld. CIT(A) who had deleted the additions made by the ld. Assessing Officer. Relevant paragraph from the decision of the Coordinate Bench vide para-17 is extracted below for ready reference:

17. Considering the observations of the authorities below, we are of the firm conviction that the A.O., except for relying upon the excel sheets/ledger accounts retrieved from the SAP-based “JSK server” during the course of search & seizure proceedings conducted on “JM Jain” Group, had failed to place on record any documentary evidence, which could irrefutably evidence that the cash deposits disclosed under the name of the assessee in the seized documents were the actual transactions carried out by the assessee. We concur with the Ld. CIT(A) that whenever reliance is placed on evidence discovered from the premises of a third party or based on the evidence of third parties, certain principles of natural justice have to be strictly followed, failing which the impugned addition made in the hands of the assessee cannot be sustained and is reduced to a nullity. Ostensibly, the assessee had though stated before the A.O. that the scanned copies of the excel sheets, based on which the impugned addition was sought to be made, were vague, but despite that, no proper photocopies of the same were made available to him. Also, it is a fact discernible from the order of the CIT(A) that the assessee, despite specific request for the cross-examination of the “JM Jain” Group entities, i.e., the third parties on whose statements adverse inferences were sought to be drawn against him, was however, most arbitrarily divested of the said statutory right. We are of the firm conviction that not allowing the assessee firm an opportunity to cross-examine the aforementioned third party, while acting upon the latter’s statements for drawing an adverse inference in his hands, is nothing but a flagrant violation of the basic tenets of the principles of natural justice i.e. audi alteram partem. Our aforesaid view that denial to the assessee to cross-examine the witness whose statement was made the basis of the impugned addition made in his hands is a serious flaw which renders the order a nullity, as it amounts to a violation of the principles of natural justice, is supported by the judgment of the Hon’ble Supreme Court in the case of M/s. Andaman Timber Industries Vs. Commissioner of Central Excise [(2015) 281 ELT 431 (SC)] and Civil Appeal No. 4228 of 2006, dated 02.09.2015. The Hon’ble Supreme Court after exhaustive deliberations on the denial of the right of an assessee for cross-examination of a witness, whose statement was being acted upon by the adjudicating authority and had formed the basis of drawing an inference in his hands, had held that not allowing the same amounted to violation of the principles of natural justice because of which the assessee was adversely affected. The Hon’ble Apex Court further observed that not allowing cross- examination constituted a serious procedural flaw which rendered the order a nullity. The Hon’ble Supreme Court disapproved the view taken by the Tribunal, which had observed that no useful purpose would have been served by allowing the cross-examination of third parties to the assessee before it. The Hon’ble Apex Court had observed that it was not for the Tribunal to have guessed as to for what purpose the assessee/respondent wanted to cross-examine the third party and what extraction he wanted from them. The Hon’ble Supreme Court, considering the aforesaid facts, had set aside the impugned order passed by the Tribunal and allowed the appeal. For the sake of clarity, the relevant observations of the Hon’ble Apex Court are culled out as under:

“We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue.

According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross- examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.

In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice.”

We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal.”

6. Per contra, ld. CIT DR placed strong reliance on the observations and findings of ld. Assessing Officer for the additions made in the assessment.

7. We have heard both the parties and perused the material on record. We have given our thoughtful consideration to the detailed submissions, decisions of the Coordinate Bench and observations and findings of ld. CIT(A) along with corroborative material placed on record in the paper book. At the outset, we refer to the satisfaction note recorded u/s. 148 for initiating the impugned proceedings. From para- 2 of the said satisfaction note, an undisputed fact emerges that addition in the present case are based on certain excel sheets and other material found and seized during the course of conduct of search and seizure action in the case of JM Jain Group known as “JSK”. In the said para- 2, it is noted that in the course of search, numerous other pieces were found through which the data of parallel books of accounts “JSK Server” was corroborated. In para-4 of the said satisfaction note, it is noted that in the post-search investigation, departmental authorities had found that cheque transactions were recorded in the books of accounts by the customers/vendor parties, however, cash transactions were not recorded. The basis of these observations made in para-4, is the statement recorded during the post-search investigation of various customers/vendors parties. This resulted into drawing an adverse inference that the cash transaction made by the customer/vendor parties remain unaccounted.

7.1. In this respect, ld. Counsel for the assessee evidently demonstrated and brought on record the correct factual position that the transaction executed through banking channel by way of RTGS do not match with the ledger statement forming part of the books of account of the assessee. Hence, the very basis which has led to form an adverse inference has no legs to stand and the addition made in this regard are unsustainable. Also, in para-6, there is a specific reference to the excel sheets based on which ld. Assessing Officer has noted that assessee has not offered income with respect to the said transaction executed in cash which has remained unexplained. In this regard, compliance requirement of section 65B(4) of the Evidence Act, 1972 remained unfulfilled, thus, rendering the usage of this third-party electronic material, not in accordance with the provisions of the relevant law.

7.2. Further, reference is made to the note of ld. PCIT-17, Mumbai, dated 26.02.2024 while granting approval for the issue of notice u/s. 148. In the note recorded by the ld. PCIT, entire reference is on the excel sheet which was found in the search conducted at JM Jain Group on which certain transactions were recorded with respect to cash transactions made by the assessee.

7.3. From the careful reading of the first appellate order and the findings arrived therein, we find that the factual matrix before us and as considered by the ld. CIT(A) is substantially identical to the one already dealt by the Coordinate Bench in the case of Vikas Kumar Chhajer (supra). Thus, the issue before us in the present appeal is no longer res integra. Except for the excel sheet recovered from the third party, i.e., JM Jain LLP in the course of search and recording of statements of certain persons unrelated to the assessee, no other contemporaneous documents belonging to the assessee has been brought on record to demonstrate that assessee has actually undertaken the said transactions as alleged by the ld. Assessing Officer supposed to be in cash. There is no independent financial trail, no evidence of movement of cash nor any other corroborative material to establish the allegation raised while initiating the re-assessment proceedings. It is a settled position of law that the presumption arising from material recovered during the search is primarily available against the person from whose possession or control such material is found. Mere mention of name of assessee in the records maintained by another person or inclusion of such name in a disclosure made in the statement recorded during the course of search cannot by itself dispense the requirement of independent corroboration so as to bring that presumption to a reality.

7.4. Before us, ld. CIT DR could not point out any distinguishing feature either on facts or in law to take a divergent view from the one already taken by the Coordinate Bench in the case of Vikas Kumar Chhajer (supra). Since the issues before us arise out of the very same search and the additions made are based on the same category of evidence, following the judicial discipline, more particularly in absence of any distinguishing factual feature, we do not find any reason to depart from the findings given by the Coordinate Bench (supra).

7.5. We also take note of another decision of the Coordinate Bench in the case of Din Dayal Jalan Textile Pvt. Ltd. vs. ACIT in ITA No. 7676/Mum/2025, dated 16.02.2026 wherein also similar factual matrix was dealt with. The fact as considered by the Coordinate Bench in this case are extracted from para-11.

11. During the course of hearing, the learned Authorised Representative (AR) reiterated the facts and submitted that the addition of Rs. 1,00,00,000/- as alleged unaccounted commission paid to M/s J.M. Jain LLP has been made solely on the basis of information received from the Investigation Wing in consequence of search conducted in the case of J.M. Jain LLP on 28.05.2022. It was submitted that during search proceedings in the case of J.M. Jain LLP, certain entries were allegedly found in a parallel SAP based server known as “JSK Server”, said to record cheque components and cash components of transactions. On that basis, it was alleged that the assessee had paid Rs. 2,00,00,000/- to M/s J.M. Jain LLP, out of which Rs. 1,00,00,000/- was treated as unaccounted commission.

7.6. On the above stated facts, the Coordinate Bench concluded in para-32 that additions confirmed by ld. CIT(A) cannot be sustained based on assessee’s objection on lack of corroboration and denial of effective opportunity. The said para is extracted for ready reference:

32. Considering the totality of facts, the contradictions highlighted by the learned DR, and the assessee’s objections on lack of corroboration and denial of effective opportunity, we are of the view that both additions, as confirmed by the learned CIT(A), cannot be sustained on the present record. The additions are founded primarily on third-party information without assessee-specific corroboration and without due compliance of principles of natural justice in respect of the material relied upon.

8. In the conspectus of the above detailed narration, both on facts and the position of law including provisions of the Act and the judicial precedents, we find that ld. CIT(A) has elaborately dealt with the issues both on fact and law so as to delete the additions made. Accordingly, we do not find any infirmity in the findings arrived at by the ld. CIT(A) wanting our interference. Accordingly, grounds raised by the Revenue are dismissed.

9. In the result, appeal of the Revenue is dismissed.

10. Assessee has filed its cross objection against the appeal filed by the Revenue. From the perusal of the grounds in the cross objection, we note that they are nothing but supporting the order of ld. CIT(A). Several grounds raised in the cross objection by the assessee are more of peripheral arguments, so as to defend its case against the appeal filed by the Revenue. All these contentions raised through several grounds of cross objection have already been addressed and considered by us while adjudicating the appeal by the Revenue which has culminated into dismissal of its appeal. Thus, no separate adjudication is warranted on the grounds of cross objection raised by the assessee. Having dismissed the grounds of the appeal in terms of our above observations and findings, the cross objection filed by the assessee stands allowed.

11. In the result, appeal of the Revenue is dismissed and the cross objection of the assessee is allowed.

Order is pronounced in the open court on 13 July, 2026