Deletion of additions for third-party impounded documents, bank stock estimates, off-the-shelf software TDS, and election estimates, with net profit on undisclosed turnover capped at 12%.

ORDER

Udayan Dasgupta, Judicial Member.- I.T.A. No.440/Asr/2025 (Assessee appeal), Asst Year : 2016-17 .

1. This appeal is filed by the assessee against the order of ld. CIT(A) -5, Ludhiana, passed u/s 250 of the IT Act, 1961, dated 21.03.2025, which has emanated from the order of the DCIT/ACIT Circle-2, passed u/s 143(3) of the Act, dated 31/12/2018.

2. The grounds of appeal taken in Form 36 are as follows:

“1. That the Ld. CIT(A) has erred on facts and law, vide order u/s 250 of the Act dt. 21.03.2025, in dismissing the appeal of the assessee against the assessment order u/s 143(3) of the Act dt. 31.12.2018 without appreciating the submissions filed during the course of appellate proceedings.

2. That the Ld. CIT(A) has erred on facts and law, vide order u/s 250 of the Act dt. 21.03.2025, in confirming the action of the AO of allowing expenses @40% resulting into application of net profit rate of 60% as against net profit rate of 8.73% declared by the assessee.

2.1 That CIT(A) failed to appreciate that the said estimation is arbitrary, devoid of any cogent reasoning, and made without reference to the past profit trends, or any comparable data or material evidence. That the addition has been made purely on estimation basis without any supporting factual or legal basis and is unjustified and bad in law.

3. That the CIT(A) erred in not reducing the declared sales of Rs.1,08,86,259 while computing the alleged undisclosed sales, resulting in duplication and inflation of income. The approach is contrary to principles of correct computation of income and leads to an unjustified addition.

4. The CIT(A) erred in not verifying the overlapping entries across multiple annexures and failing to provide the benefit of such overlap. That the direction given by CIT(A) to the AO to disregard the duplication after verification is against the provisions of law.

5. That the AO has erred in invoking the provisions for Section 115BBE without invoking the provisions of Section 68 to 69D.

6. That the Ld. CIT(A) has erred on facts and law, vide order u/s 250 of the Act dt. 21.03.2025, in confirming the addition of Rs. 3,97,35,772/-, based on Annexure A-22, and the action of the AO of invoking the provisions of Section 115BBE of the Act, without appreciating that Annexure A-22 pertains to the business entities of assessee’s husband Sh. Harinder Pal Singh, as already accepted by the Department in the assessment for AY 2017-18. The contradictory stand of AO in taxing the same annexure in the hands of the assessee for AY 2016-17 is arbitrary and legally unsustainable. The addition sustained by the CIT(A) in respect of A-22 is contrary to the findings recorded by the CIT(A) in paragraph 5.2.3 (iv) at page no. 38 of the CIT(A) order.

6.1 That the CIT(A) erred in invoking the presumption under section 292C, ignoring that such a presumption is rebuttable in nature. The CIT(A) failed to appreciate that the notings in Annexure A-22 clearly mention the name of the entities belonging to the assessee’s husband, thereby rebutting the presumption of ownership by the assessee. The order of CIT(A) suffers from nonapplication of mind to material evidence on record.

6.2 Without prejudice to the above grounds, the CIT(A) erred in confirming the addition based on Annexure A-22 by selectively relying only on the receipt side, ignoring the settled principle that a document must be read as a whole. The CIT(A) failed to give due credit for the corresponding payments/reflections on the payment side, thereby resulting in an inflated and unjustified addition.

7. That the CIT(A) erred in confirming the disallowance of Rs. 47,400 for non-deduction of TDS on software payment of 1,58,000, without appreciating that once the books of account have been rejected, no separate disallowance of individual expenditure items can be made. The addition is therefore untenable and contrary to settled judicial principles.

8. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.”

3. Now facts of the case as emerging from records are that the appellant is an individual and is the proprietor of M/s B. Beautiful, a concern engaged in the business of operating a beauty salon and a boutique.

3.1 That the appellant declared a profit of Rs. 9,67,650/- in the return of income for A.Y. 2016-17 filed on 05.11.2016. The books of account were duly audited by a Chartered Accountant under the provisions of the Income Tax Act, 1961.

3.2 That a survey u/s 133A of the Act was conducted at the business premises of the appellant on 09.03.2017, during which certain documents, including loose papers and Annexures A-1 to A-49, were impounded from the business premises of M/s B. Beautiful.

3.3 That the AO completed the assessment u/s 143(3) vide order dated 31.12.2018, whereby aggregate additions of Rs.5,86,79,788/- were made on the basis of the impounded annexures, along with a further addition of Rs. 47,400/- on account of the alleged failure to deduct tax at source on software expenses.

The summary of the assessment are as under :

4. Subsequently, pending appeal before the Tribunal, the AO as per direction of the Ld CIT (A) vide his appellate order dated 21/03/2025, has reconciled the duplicate entries vis a vis the impounded annexures and has arrived at the REVISED figures which are tabulated below:

5. Now the dispute before the tribunal is concentrated on the three additions below:

6. The assessee in course of hearing has filed written submission in respect of the above three issues in dispute along with reference to judicial decisions relied upon in support of his contention, before the tribunal, which are reproduced :

That reliance is placed on the following judicial precedents holding that where books are rejected the estimate of profit must be based on past history:

D. Submissions in respect of Ground No. 7 (Disallowance of Rs. 47,400/- for nondeduction of TDS on software expenses)

That reliance is placed on the following precedents on the requirement of human intervention for a payment to be “fees for technical services”:

That the disallowance of Rs. 47,400/- is unwarranted and deserves to be deleted in the interest of justice.

The Ld AR concluded his arguments retreating the above submissions and prayed for adequate relief.

Per contra the Ld CIT / DR has not filed any submissions and has relied on the order of the Ld CIT (A) .

7. Our observations and decision:

Estimation of Profits on undisclosed Receipts : In respect of the first issue relating to estimation of profits on undisclosed sales / receipts , it is the fair percentage of profits which needs to be applied. In the instant case the undisclosed RECEIPTS (excess receipts) from the business carried out by the assessee has been crystallised after removable of duplicate entries from impounded documents by the AO (in course of appeal effect order) and the said excess or undisclosed amount of receipt is accepted at Rs. 24,40,609/-. The regular profit percentage as declared in audited financials and regular return was 8.5% in usual course. The AO has applied a profit percentage of 60% on the undisclosed portion of the receipts and determined the profits from saloon and boutique at Rs. 14,64,365/-, a percentage rate which has also been upheld by the Ld first appellate authority. The Ld AR of the assessee has filed elaborate submissions (as reproduced above) praying for reducing the estimated percentage to a FAIR rate as per logically accepted business principles and has relied on various decisions of courts to submit that even in cases where undisclosed or suppressed sales are found, profits on the said undisclosed portion needs to be assessed at a FAIR rate. We are of the opinion that to determine the flat rate of profits we need to take into account the rate of profits made by the assessee in past years, the average rate of profits made by other persons in similar line of business , and in the instant case no such comparative has been brought to our knowledge, neither by the assessee or the revenue and we find that the disclosed profit rates of the assessee is 8.5% (for the year under appeal). As such considering the judicial precedents discussed in above paragraphs, and considering the carrying out of a business of beauty saloon by the assessee , we estimate the flat rate of profits on the undisclosed portion at (Twelve percentage) ie 12% of Rs. 14,64,365/- (after all expenditures) and the assessee gets consequential relief.

8 . Addition of Rs. 3,97,35,772/-based on Annexure A-22 , We find that the same has been sustained on basis of entries in impounded Annexure A-22, on the basis of presumptions , even though the assessee explained from the very beginning that the said Annexure belongs to her husband “Sh. Harinder Pal Singh Gill “, who is the sole proprietor of ” Harry Auto Fuel “and “Gill Rice Mills” and the revenue also accepted that Annexure A-22 belongs to Sh. Harinder Pal Singh Gill. (Reference on this count is made to Para 4 at page 8 of the assessment order of Sh. Harinder Pal Singh Gill, wherein the AO records that Annexure A-22 impounded from the premises of M/s B. Beautiful pertains to Sh. Harinder Pal Singh Gill, and the noting in Annexure A-22 for A.Y. 2017-18 have been replicated in his hands with no corresponding income attributed to the assessee (wife) .Therefore, making separate additions in different assessment years on the basis of the same annexure and identical entries amounts to, inconsistency and non-application of mind on the part of the AO.

9 . Moreover, we find that that the assessee has furnished complete details of all entries relating to Harry Auto Fuel (HAF) and Gill Rice Mill (GRM), both proprietorships of Sh. Harinder Pal Singh Gill, as derived from Annexure A-22, (which is a part of the pb page 84-129) , and the records integrates with the husbands business and duly accepted by him and disclosed in his regular return and recorded in his regular books , to which there is no dispute. Moreover, internal records of the husbands business including bank statement entries , corroborates with the entries in impounded documents which seamlessly aligns with regular reported business ledger of the husband and has been considered in his hands.

10 . We are also of the view that presumption u/s 292C of the Act, assumes that books of accounts found during survey belongs to the assessee and that their contents are true. The initial presumption is certainly in favour of the revenue regarding survey documents but the assessee holds the right to disprove this assumption by producing counter evidence , explanations and material facts , which the assessee has successfully done in this case (as discussed in the above paragraph) and onus of proof has shifted from the assessee to the revenue and now the said ” onus” lies on the revenue to prove otherwise, because we have to keep in mind that presumptions u/s 292C cannot be simply applied mechanically without allowing any chance of defence .

11 .We also find that the fact that entries in the impounded annexure A 22 , belongs to the husband, has been accepted by the husband in the same assessment year in his regular returns and financials and also by the AO in subsequent year (Asst year 2017-18) and it is not open to the AO to take a different view in absence of any material changes.

On this issue we rely on the Hon’ble Apex court in the case of CIT v. Excel Industries Ltd.  379/358 ITR 295 (SC)

The Supreme Court held that if a fundamental aspect permeates through different assessment years and has been accepted in one year, it is not appropriate to take a different view in a subsequent year unless there is a material change in facts or law.

Similar, view also taken by the Hon’ble jurisdictional High court in the case of CIT v. Haryana Tourism Corporation Ltd. (2010): 327 ITR 26 The Punjab & Haryana High Court upheld the principle of consistency, highlighting that deviations from earlier decisions without valid reasons can lead to contradictory findings.

12. Regarding the ground of the assessee that impounded documents has to be read as a whole eg. Annexure A-22 and not in a piecemeal manner , the assessee has pointed out that the AO has considered only the receipt side and ignored the payment side, which also pertains to HAF and GRM, which is arbitrary because at best, only the income element embedded in the transactions and not the gross receipts could be brought to tax and he pointed out the fact that peak credit in the instant case was only Rs. 31,215/-.

13. We are of the opinion that as per Rule of Evidence, impounded documents must be accepted and evaluated as a “whole”, because as per presumption u/s 292C of the Act, if the receipt side is presumed to be true and correct , the same truth equally applies to both entries, incoming as well as outgoing and there cannot be any selective reliance on any one part at the discretion of the revenue.

14 .As such we are of the opinion that the addition of Rs. 3.97 crores made by the AO and sustained by the Ld CIT (A) solely based on incoming entries of the impounded Annexure A 22 , without considering the outgoings and also considering the fact that the contents of the said Annexure integrates with the regular books of the husband of the assessee and has been accepted and owned by the husband of the assessee as relating to his own proprietorship business and also accepted by the revenue in subsequent year , cannot be sustained in the hands of the assessee and the same is deleted.

15. Regarding the last issue relating to TDS on software, the AO disallowed Rs. 47,400/- for alleged non-deduction of TDS on software expenses of Rs. 1,58,000/-. The contention of the assessee is that this software expenses is in the nature of purchase of standardized software and do not constitute payments for technical or professional services attracting deduction of tax at source.

16. We find that in the instant case the revenue has not brought anything on record to prove that the software expenses is payments made for “technical services ” or by way of “Royalty” to be covered u/s 194J of the Act . As per assessee there is no transfer of specific copyright use, reproduction rights, and neither it is payment for any customs software development . The ld AR explains the said expenses to be standard off the shelf software purchase which are treated as goods.

17. We are of the opinion that it a standard retail software bought for internal business use without any underlying copyright transfer and as such it is to be treated as purchase of goods, and no TDS is required on the said purchase. This ground of appeal of the assessee is allowed .

18. In the result this appeal of the assessee is partly allowed.

1. This appeal is filed by the revenue against the order of ld. CIT(A) -5, Ludhiana, passed u/s 250 of the IT Act, 1961, dated 27.02.2025, which has emanated from the order of the DCIT, Central Circle-2, passed u/s 143(3) of the Act, dated 30.12.2019.

2. The grounds of appeal taken in Form 36 are as follows:

1 .This is a departmental appeal and in course of hearing the Ld DR has not filed any written submission. She has relied on the order of the AO.

2 .Per contra the Ld AR of the assessee submitted that the Department has challenged the deletion of Rs.3,55,79,500/- by the Ld. CIT(A) which was made on protective basis. However, the Ld. CIT(A) merely deleted the protective addition, while no finding sustaining any substantive addition in the hands of the assessee was recorded.

3 He further stated that most of the entries appearing in the impugned annexure pertain to Harinder pal Singh & Gill Medicare Private Ltd. and do not belong to the assessee as apparent from (page no. 18 on para 8.5 of the assessment order). Therefore, no addition on the basis of such entries could validly be made in the assessee’s hands.

4 .That the Ld. CIT(A) was, therefore, justified in deleting the protective addition, and the Department’s ground deserves to be dismissed. Considering the above factual and legal position, it is submitted that the addition sustained by the learned CIT(A) is unjustified, contrary to law, and deserves to be deleted in full.

5 .We have heard the rival submission and we find that protective assessment cannot remain at large , it has to be made substantive on some entity and in the instant case , the entries appearing in the impugned annexure pertain to Harinder pal Singh & Gill Medicare Private Ltd.

6 .Moreover, the Ld CIT/ DR has not raised any verbal objection nor made any submission.

7 . As such we are of the opinion that the Ld CIT(A) was legally justified in deleting the assessment made on protective basis and we are in agreement with the same.

8 . The appeal of the revenue ITA – 489/ ASR / 2025 is dismissed.

1. This appeal is filed by the assessee against the order of ld. CIT(A) -5, Ludhiana, passed u/s 250 of the IT Act, 1961, dated 27.02.2025, which has emanated from the order of the DCIT, Central Circle-2,Bhatinda, passed u/s 143(3) of the Act, dated 30.12.2019.

2. The grounds of appeal taken in Form 36 are as follows:

“1. That the Ld. CIT(A) has erred on facts and law, vide order u/s 250 of the Act dt. 27.02.2025, while confirming the addition of Rs. 5,74,35,440/- made by the AO vide order u/s 143(3) of the Act dt. 30.12.2019 .(This quantum is modified to Rs. 3,87,65,440/- post first appeal).

2. That the CIT(A) erred in confirming the addition of Rs. 90,00,000 by applying an arbitrary Net Profit rate of 60% on the enhanced turnover of Rs. 1,50,00,000. That CIT(A) failed to appreciate that the rate applied is excessive, unreasonable, and contrary to industry norms and the assesses past history, as accepted by the department in assessments under framed section 143(3).

3. That the CIT(A)) erred both in law and on facts in confirming the addition of 21,71,372 under Section 698 read with Section 115BBE of the Income-tax Act, 1961, as made by the Assessing Officer, solely on the basis of a stock statement submitted to the bank, without any independent or corroborative evidence to establish that the assessee made any unexplained or excess investment in stock.

3.1 That the CIT(A) erred in law and on facts in upholding the addition made by the Assessing Officer under Section 69B of the Income Tax Act, 1961, on account of alleged excess stock, without appreciating that Section 69B applies only to unexplained investments in money, bullion, jewellery, or other valuable articles. In the present case, there is no evidence to show that the assessee was in possession of any such unexplained assets, and hence, the invocation of Section 698 is misconceived, unjustified, and bad in law.

3.2 That the CIT(A) overlooked the fact that stock-in-trade or stock of small denominations, do not fall within the ambit of Section 69B of Income Tax Act 1961.

4. That the CIT(A) has erred in law and on facts in confirming the addition of Rs. 10,00,000/- under section 69 read with section 115BBE of the Act on account of alleged unexplained investment in purchase of a plot, without properly appreciating that no such property was ever purchased by the assessee.

4.1 That the CIT(A) has erred in law and on facts in confirming the addition of Rs. 10,00,000/- under section 69 r.w.s. 115BBE of the Income Tax Act, 1961, based solely on a rough and unauthenticated noting on Page No. 303 of Annexure A-46 seized during the survey, without any corroborative evidence such as identity of the seller, agreement, or registered deed, rendering the addition arbitrary and unsustainable in law.

5. That the CIT(A) has erred in confirming the addition of Rs. 30,00,000/-under section 69 of the Act based solely on a rough estimate noted on Page No. 330 of Annexure A-46, without any evidence of actual expenditure during the year, despite the assessee’s explanation that the renovation was carried out in F.Y. 2013-14, making the addition unsubstantiated and unsustainable in law.

5.1 That the addition of Rs 30 Lakh confirmed by the CIT(A) is bad in law as it has been made purely on the basis of a statement without any supporting documentary evidence. The assessing officer and CIT(A) have failed to consider the absence of vital documents such as bills, vouchers, payment records, or third-party confirmations to establish the actual incurrence of the expenditure during the relevant assessment year.

6. That the CIT(A) has erred in law and on facts in confirming the addition of Rs. 1,48,45,000/- under section 69C r.w.s. 115BBE of the Income Tax Act, 1961, on account of alleged unexplained expenses related to election. That the CIT(A) failed to appreciate that the assessee did not contest any election during the relevant year or any other year. Further, the CIT(A) failed to consider the assessee’s explanation regarding the addition of Rs. 1,31,13,228/-which includes the negative cash found in the impounded documents.

7. That the CIT(A) erred in conforming the addition of Rs. 1,86,70,000 in respect of credit entries of Annexure A-48 without granting the benefit of the corresponding debit entries appearing in the same Annexure.

7.1 The CIT(A) erred in not verifying the overlapping entries across multiple annexures and failing to provide the benefit of such overlap. That the direction given by CIT(A) to the AO to disregard the duplication after verification is against the provisions of law.

8. That the Cit(A) has erred in conforming the addition of Rs. 83,19,072/-under section 68 in respect of credit to the capital, current and personal accounts without appreciating that the AO ignored corresponding debit entries and Without identifying any defect in the peak working submitted by the appellant based on Annexure A-48 and entries in capital account.

9. Without prejudice to above ground that the CIT(A) has erred in not providing telescoping benefit of additions confirmed on account of net profit against other additions. That CIT(A) has failed to appreciate the cash movement as recorded in aforesaid annexures was sourced from unrecorded sales.

10. That the CIT(A) has erred in conforming the addition of Rs.4,30,000 made by AO under section 68 read with section 115BBE despite rejection of books of account rendering invocation of section 68 legally unsustainable.

11. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.”

1. The facts of the case for this year under appeal is that the assessee has declared a loss of Rs. 25,69,913/- in the income tax return for the assessment year 201718, which was filed on 30.03.2018. The books of the appellant were duly audited by a Chartered Accountant in accordance with the provisions of the Income Tax Act, 1961.

2. That the chronology of events relevant to the present appeals is tabulated below:

3. That the additions made by the AO, the relief granted by the Ld. CIT(A), and their consequential status pursuant to the appeal-effect order dated 15.09.2025 are summarized in the table below, which delineates the issues arising in the two cross-appeals before the Tribunal:

4. The summary of addition challenged and its bifurcation among income vs application is tabulated as under:

In course of hearing of appeal written submissions were filed by the assessee on the basis of which arguments were made. The same is reproduced :

The submission to the ground raised by the appellant is as under:

That the Assessing Officer, on the basis of certain documents impounded during the course of survey proceedings, enhanced the gross turnover declared by the assessee from Rs. 1.23 crore to Rs. 1.50 crore and thereafter estimated the income by applying an exorbitant net profit rate of 60%. The relevant findings of the Assessing Officer are recorded at page 4 of the assessment order. The Ld. CIT(A), vide findings contained at pages 52-53 of the appellate order, upheld both the enhanced turnover and the application of the net profit rate of 60% as adopted by the Assessing Officer.

Submissions in respect of Ground Nos. 3, 3.1 & 3.2 (Addition of Rs. 21,71,372/- on the basis of a stock statement submitted to the bank)

Provision of Sec. 69B are not applicable

That, even otherwise and without prejudice, the enhanced tax rate of 60% introduced in section 115BBE by the Taxation Laws (Second Amendment) Act, 2016 could not be applied to the transactions pertaining to the previous year 2016-17 relevant to A.Y. 2017-18. The Hon’ble Madras High Court in S.M.I.L.E. Microfinance Ltd. v. ACIT* 479 ITR 172 (Madras) held that, in respect of transactions undertaken during the period prior to 01.04.2017, the erstwhile rate of 30%, and not the subsequently enhanced rate of 60%, would apply. Accordingly, the invocation of section 115BBE itself is untenable in the present case and, in any event, the enhanced rate of 60% could not have been applied for A.Y. 201718. Similarly, reliance is being placed upon Deepak Maratha S/o Ramchandra Maratha Versus Union Of India, New Delhi And Principle Commissioner of Income Tax- reported in 2026 (6) TMI 371 – RAJASTHAN HIGH COURT where the court has held that S. 115BBE is not applicable for income for FY 2016-17

6. Submissions in respect of Ground Nos. 4 & 4.1 (Addition of Rs. 10,00,000/- alleged investment in ‘ITI plot’ (Page 303, Annexure A-46) (AO Page no. 7 Para 6(ii) and CIT(A) page no. 59)

7. Submissions in respect of Ground Nos. 5 & 5.1 (Addition of Rs. 30,00,000/- Alleged investment in renovation of salon (Page 330, Annexure A-46) (AO order page no. 8 para 6(iii) and CIT(A) page no. 59):

That section 69 fastens on an investment ‘made’ in the financial year in question. There is no material whatsoever to place the alleged investment in F.Y. 2016-17. The addition is therefore bad even on the Department’s own hypothesis, and is prayed to be deleted.

8. Submissions in respect of Ground Nos. 6 (Addition of Rs. 1,48,45,000/- Alleged unexplained election expenditure (Page 21, Annexure A-45) :

10. Submissions in respect of Ground Nos. 8 & 9 (Addition of Rs. 83,19,072/- on account of credits in the capital, current and personal accounts)

11. Submissions in respect of Ground Nos. 7 & 7.1 (Duplication of Rs. 1,86,70,000/-: This ground of appeal No – 7 is treated as withdrawn because the grievance of the assessee is settled by the AO post first appeal direction.

Relying on all the above submissions the Ld AR prayed for adequate relief on the grounds contained in the memo of appeal.

12 .The Ld DR has not filed any submissions and has relied on the order of the Ld CIT (A) .

Ground No 2 : Addition of Rs. 90 lakhs by applying Net Profit rate @ 60% on estimated Sales / Receipts. Our observation on this issue in ITA No 440/ ASR / 2025 for the Asst year 2016-17 applies ” mutatis Mutandis ” and we are of the opinion that a Net Profit percentage of (twelve percentage) 12% on the Gross Sales (after all expenditure) will meet the ends of justice and we direct accordingly. This ground of appeal is partly allowed.

Ground No : 3 : Addition of Rs. 21.71 lakhs on account of Stock statement submitted to bank : As stated by the Ld AR , the stock statement has been specifically prepared for submitting before bank for obtaining higher credit facility and the said quantity of stock never physically existed at any point of time and the said statement was just an estimated figure without any item wise quantitative details and rates of stock. The said stock never physically existed and has not been found in course of SURVEY and there is no evidence that the bankers has examined the stock physically. Respectfully, relying on the decision of the jurisdictional High court in the case of ‘ Sidhu Rice and General Mills “281 ITR / 428 [2006] Punjab and Haryana HC on this issue we delete the said addition. This ground of appeal is allowed.

Ground No 4 : Addition of Rs. 10 lakhs based on noting in seized diary regarding alleged investment in plot of land which is not corroborated by any other documents. In absence of any supporting documents such as agreement, purchase deed, mutation papers, payment records, third party confirmation or in absence of any enquiry with the Sub registrar , regarding any investment in plot of land being brought on record, the addition simply based on some noting in impounded annexure , cannot be sustained and hence the said addition is deleted. This ground of appeal is allowed.

Ground No 5 ; Addition for alleged renovation of Salon Rs. 30 lakhs. It is explained by the Ld AR of the assessee that the said renovation of the saloon has been carried out in the FY 2013-14, and the total expenses amounting to approximately Rs. 28.97 lakhs is duly reflected in regular books (and audit report on record). The addition in this year under appeal has been made on the basis of an impounded sheet of paper, A-46 / page 330, which is unsigned and undated without any identification of the premises renovated which contains breakup of head-wise expenditure (as reflected in earlier paragraph) totalling Rs.29.50 lakhs (all heads appearing in rounded off figures). In absence of any other material brought on record by the AO except the sheet of paper containing the renovation breakup (undated) , the explanation of the assessee seems to be a possible explanation under the circumstances , more so when the figures of Rs. 29.50 and Rs. 28.97 are almost matching . As such we remand this issue back to the AO for verification of FY 2013-14 assessment records and audit report and if the investments are found recorded and disclosed, the addition on this count will stand deleted. This ground of appeal is set aside to the AO with direction for limited purpose as indicated above.

Ground No 6 : Addition of Rs. 1,48,45,000/- u/s 69 C on account of alleged unexplained “election expenditure” which is flowing from impounded document A-45 page 21 . It is explained by the Ld AR that the assessee was the President of the Mahila Wing of a political party and was contemplating to contest the Bhatinda Urban constituency elections and has made an estimate of the proposed expenditure that might be incurred regarding cost of campaign and allied expenses . However, the assessee never contested the Punjab legislative election of February 2017 , nor any other election for that matter and the proposed expenditure remained a proposal and no expenditure has been actually incurred and no documentary evidence of any such expenses actually incurred has been found in course of survey and the impounded document of estimated / proposed election expenditure has remained unsupported by any corroborative evidence, and no documentary evidence has been obtained from the District Election Officer in this regard . As such in absence of any LINK being established between the paper and actual transactions using independent proof it is devoid of complete transactional context and cannot be considered as substantive evidence. As such respectfully following the law laid down by the Hon’ble Apex court in the case of CBI v V C Shukla & Others 2^nd March, 1998 / AIR 1998 SC 1406 we delete the addition of Rs. 1.48 crores , considering the noting to be a mere proposal not actual expenses incurred. This ground of appeal is allowed.

Ground No 7 : This ground is withdrawn as proper rectification has been done by AO in consequence of first appeal order. The assessee has no further grievance. This ground is dismissed as withdrawn.

Ground No 8: and 9: Addition of Rs. 83.19 lakhs due to accretion of assessee capital, current and personal accounts, which was treated as cash credits without considering the corresponding debits representing cash withdrawals and transfers from the same account and as per the Ld AR of the assessee the peak works out to Rs.39.13 lakhs. Another issue raised by the Ld AR is that since the books are rejected u/s 145(3), the same rejected books cannot be considered for making additions u/s 68, and he relied on the Hon’ble jurisdictional High court in the case of CIT v Aggarwal Engineering co [2008] 302 ITR 246. Redit He further argued that the estimated business income determined should be telescoped against the peak credits, because the source of accretion of capital flows from the same business. We are in agreement with the submission of the Ld AR on this issue that only the peak should be considered and benefit of telescoping should be allowed and as such we consider it fit and proper to set aside this issue back to the AO for allowing opportunity to the assessee to properly reconcile and for consideration of the issue afresh.This ground of appeal is set aside.

Ground 8 (h) Applicability of section 158BBE to the year under appeal : Respectfully following the law laid down by the Hon’ble Rajasthan High court in the case of “Deepak Maratha v. UOI [2026] CW / 3625/2020 dated 27/05/2026, and also on the decision of the Hon’ble Madra High court in the case of SMILE Microfinance Ltd v ACIT  we hold that the provisions of section 115BBE is not applicable for the income of the financial year 2016-17.

Ground 10: Addition of Rs. 4,30,000/- on account of Sukhdev Singh u/s 68 of the Act 61. The out of the total loan advanced by the assessee during the year amounting to Rs. 8,80,000/-, through bank channel, an amount of Rs. 4,50,000/-has been accepted as explained, leaving the balance amount of Rs.4,30,000/- as unexplained . Considering the fact that the books of accounts has been rejected u/s 145(3) in this case, the same books cannot be relied upon for making additions u/s 68. Relying on the decision of the jurisdictional High court in the case of CIT v Aggarwal Engineering Co  (P & H) and also CIT v Dulla Ram Labour Contractor [2014]   (P& H) , where books are rejected entirely the AO cannot rely on the same books for making addition u/s 68 and we also rely on CIT v. Bahubali Neminath Muttin   (Karnataka) dated 13/07/2016, where it has been held that rejected books cannot be relied upon in an addition on account of trade creditors . As such this addition of Rs. 4,30,000/- is deleted. This ground of appeal of the assessee is allowed.

In the result this appeal of the assesee is partly allowed.

14. In the result the appeal of the assessee in ITA NO 440/ ASR/2025 for the Asst year 2016-17 and in ITA No 626/ ASR 2025 for Asst year 2017-18 are partly allowed and the appeal of the revenue in ITA – 489/ ASR / 2025 for the Asst year 2017-18 is dismissed.

Order pronounced on 31.08.2026 under Rule 34(4) of the Income Tax Appellate Tribunal Rules 1963.