Calcutta High Court Upholds ITAT Order Deleting ₹11.35 Crore Addition For Alleged Cash Loans

On 5 October, the Calcutta High Court dismissed the Revenue's appeal against the Income Tax Appellate Tribunal's (ITAT) September 2025 order deleting a Rs. 11.35 crore addition made against businessman Suresh Kumar Banthia for Assessment Year 2020-21.

A Division Bench comprising Justices Rajarshi Bharadwaj and Sudip Deb held that although the strict rules of evidence do not apply to income-tax proceedings, tax authorities and tribunals are guided by the general principles underlying the law of evidence and natural justice. It observed:

“...the strict rules of the Indian Evidence Act (now Bharatiya Sakshya Adhiniyam) do not apply to income tax proceedings but the Tax Authorities are guided by its underlying general principles and natural justice. It is important to mention here though the Income Tax Authority and Tribunals are not bound by the rigours but the proceedings initiated under Income Tax Act can still invoke common law principles and foundation of rules of evidence.”

The Assessing Officer had initially made additions of Rs. 3.01 crore towards alleged unexplained cash loans and Rs. 4.46 crore towards interest. The Commissioner of Income Tax (Appeals) subsequently enhanced the total addition to Rs. 11.35 crore based on the peak credit reflected in certain impounded documents.

The Revenue argued that the ITAT had ignored incriminating material and wrongly accepted Banthia's retraction of his statement recorded during the survey.

The High Court noted that the search of two financial brokers, Kasera and Sanwaria, had taken place in November 2018, before the commencement of the relevant financial year for Assessment Year 2020-21. The ITAT had found that the material seized during the search did not establish any connection with Banthia's income for the assessment year in question.

It also held that Banthia had retracted his survey statement within five days, alleging that it was recorded under coercion and that there was no corroborative evidence. The ITAT had found that the Assessing Officer failed to bring any substantive material to corroborate the entries in the seized and impounded documents.

Further, the Bench pointed out that although the names of persons allegedly involved in the cash loan transactions appeared in the material, their statements were neither recorded nor were summons issued to them, despite their contact details being available with the authorities.

Referring to the Supreme Court's rulings in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income Tax and Omar Salay Mohamed Sait v. Commissioner of Income Tax, it reiterated that tax authorities cannot make an assessment based on mere guesswork, suspicion or conjecture.

The judges found that the ITAT, being the last fact-finding authority, had correctly assessed the documentary evidence and arrived at its findings after considering the material on record. They found no irregularity or perversity in the Tribunal's order and held that the questions raised by the Revenue were purely questions of fact. They held:

“Non-applicability of the Evidence Act in its technical sense does not prevent the Income Tax Authority from invoking the general principles embodied in the Evidence Act. We find from the impugned order that the Appellate Tribunal has correctly assessed the admissibility of the documentary evidence.”

Accordingly, the High Court dismissed the Revenue's appeal and the stay application, finding no substantial question of law.

For Appellant: Advocates Prithu Dudhoria and Madhu Jana

For Respondent: Advocate S.M. Surana