DHAVAL JEWELLERS,RAJKOT vs. ITO, WARD-2(1)(1), RAJKOT, RAJKOT

आयकर अपीलीय अिधकरण, राजकोट �यायपीठ, राजकोट । In The Income Tax Appellate Tribunal, “SMC” Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member आयकरअपीलसं/.ITA No. 822/RJT/2025 & आयकरअपीलसं/.ITA No. 422/RJT/2026 �नधा�रणवष�/ Assessment Year: 2023-24 Dhaval Jewellers Income-tax Officer, Tankarawala Estate, Ground Vs. Ward-2(1)(1), Rajkot Floor, Shop No.1-3, Palace Road, Aayakar Bhavan, Race Course Rajkot-360001 Gujarat Ring Road, Rajkot, Gujarat-360001 PAN No. AAGFD6127P (अपीलाथ�/assessee) : (��यथ�/Respondent) �नधा�रतीक�ओरसे/Assessee by : Shri Mehul Ranpura, Ld. AR राज�वक�ओरसे/Revenue by : Shri Anadi Dixit, Ld. Sr. DR सुनवाईक�तार�ख/Date of Hearing : 18/06/2026 घोषणाक�तार�ख/Date of Pronouncement : 07/09/2026 ORDER Per, Dr. Arjun Lal Saini, AM: The present two appeals have been filed by the assessee, against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal, Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 30.09.2025 arising in the matter of separate orders by the assessing officer, u/s 143(3) of the Act and a penalty order passed u/s 270A of the Income-tax Act, 1961. 2. Grounds of the appeal raised by the assessee in ITA No. 822/RJT/2025, are as follows: 1. The grounds of appeal mentioned hereunder are without prejudice to one another.

We have been served with the above stated notice requiring us show cause as to why the addition of Rs. 16,71,076/- should not be made by treating the purchase made from Tirth Gold as accommodation entry on the alleged ground that the said transaction is not reflected in the GSTR-1 filed by the Tirth Gold. In this connection, we submit as under: 1. At the outset, we vehemently deny the allegation in the impugned show-cause notice. Infect, during the relevant previous year, we have purchased gold ornaments of Rs. 16.71,076/- from Tirth Gold and the same is duly accounted for in the books of account. Furthermore, the said transaction is also recorded by Tirth Gold in its GST-1 return, filed as part of its sales for the assessment year under consideration. Thus, the entry in Tirth Gold's GST-1 return further corroborates the authenticity of the purchase, as it reflects the transaction from their side as well. 2. In order to justify our claim of purchase, we submit following documents supporting the transaction of purchase made with M/s. Tirth Gold are attached as under: (i) Copies of account of Tirth Gold, contra account and purchase bills are attached as Annexure "1". (ii) Copy of bank statement highlighting Payment entry for purchase made from M/s. Tirth Gold is attached as Annexure "2". (iii) Copy of extract of Form GSTR-2A downloaded from the GST portal, which reflects the sales details reported by Tirth Gold in their GST return. It is pertinent to note that based on the information available in the GSTR-2A, the Input Tax Credit (ITC) has been availed on purchases made from the said party is attached as Annexure "3", (iv) Copies of purchase register and sales register are attached as Annexure “4”. (v) Statement showing details of opening stock, purchase, manufactured, consumption, sale and closing stock is attached as Annexure "5". 3. From all the above documentary evidence, it is clear that, the assessee has entered into a genuine business transaction with Tirth Gold and purchase and sales are not towards accommodative entries. The Tirth Gold has already been reported the transaction of his sale in his GSTR-1 return. Further, all the amount has been received and/or paid through banking channel and the account was also settled at the year end. 4. Further, it is submitted that I have maintained regular books of account where each and every transaction is recorded and the same is duly audited by the Chartered Accountant. Further, I have also maintained quantitative details of the purchase, sale and stock. If the transactions under question are of accommodative in nature, then how could I have maintained the proper record of quantity? And if the books were not properly showing the quantity on hand, the auditor would have raised the question on quantitative records. However, on the contrary, the auditor has certified the quantitative details of stock in her audit report. Further, your good self has also not found any defect in the books of account maintained or even in the book result. Even the GST Department has not raised any question on the annual return and annual results filed on the portal, which clearly suggests that, even the GST department has considered the said the transactions as genuine. All these facts taken together strongly implies that the transactions made with Tirth Gold is real, genuine and in conformity with the legal provisions and cannot be treated as of accommodative nature. 5. It is also submitted that the consideration for purchases was made through banking channel and duly recorded in the books of accounts. Sales corresponding to such purchases are duly accounted in the books of accounts and the same sales are accepted as such. On these facts, in the case of Totaram B. Sharma in IT AppealNos 2239 and 2291 (Ahmedabad-Trib) of 2004 dated 25-1-2008 it was held that no addition could be made on account of bogus purchases. 6. Prima facie on perusal of the base for issuance of notice it is understood that the assessment proceeding may have been initiated on the alleged ground of certain documents/ data etc. found during the search proceedings in the caser of Tirth Gold. Therefore, in the interest of natural justice, it is requested to provide relevant document/data/information / statement etc, available in your domain so as to enable us to verify the facts and raise further objections in the matter. 7. Furthermore, the details used to select our case for scrutiny assessment clearly shows that they are just information from the third party and one-sided affairs. The principles of natural justice demands if the said data/information is used against us the opportunity of cross examination is must. It is well settled principles of law that merely on the basis of any document or data recovered from third parties, adverse inference cannot be drawn against the assessee in absence of any other corroborative and cogent evidence and without establishing live link of the assessee with such seized documents/data. It is hereby requested to provide an opportunity of cross-examination before relying on any such material / data. Therefore, the revenue would not be justified in resting its case on the loose papers and documents found from a third party. In this connection finding given in the case of CBI v. V.C. Shukla [1998] 3 SCC 410 is relevant, which is reproduced as under: "any presumption of transaction on some vague, tenuous and dubious entries in a sheet of paper is not rational and hence legal unless there is corroboration by corresponding entry in regular accounts of both the parties to the transaction. In this case it was held that entries in Jain Notebooks held on facts admissible under Section 34, but file containing loose sheets of papers are not "book" and hence entries therein not admissible under Section 34. Further it was also held in this case that entries in books of account shall not alone be sufficient evidence to charge any person with liability. Entries even if relevant are only corroborative evidence. Independent evidence as to trustworthiness of those entries is necessary to fasten the liability. In view of these facts it was held by the Honourable Supreme Court that entries made in the Jain Hawala diaries are under Section 34, but truthfulness thereof not proved by any independent evidence. It was also held in this case that "books" ordinarily mean a collection of sheets of paper or other material, blank, written, printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as "book" for they can be easily detached and replaced. The Supreme Court further went on to state that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness fix a liability upon a person. 7.1 Relying on the above-stated decision of Hon'ble Supreme Court of India, Hon'ble territorial ITAT, Rajkot Bench, Rajkot in the case of ITO vs. Shri Kotak Mayur Arvindbhai in ITA No. 156/RJT/2016 has held that "papers recovered from the third party and in the absence of any corroborative evidence, addition in the hands of assessee cannot be made." 7.2 Similarly reliance is placed on the decision of Hon'ble. Calcutta High Court, in the case of, Commissioner of Income-tax, Kolkata-XV vs. Tara Chand Mahipal [2016] 65 taxmann.com 29 (Calcutta) [13-08-20151, held that addition to assessee's income merely on basis of papers seized from possession of assessee's brother was unjustified when material sought to be relied on was not corroborated and also held that mere statement of assessee recorded during search cannot be basis for computation of income under section 158BB, unless it is relatable to some evidence. 8. Furthermore, it is submitted that allegation has been made in our case and adverse inference has been drawn based on the impugned statement made by Shri Pravinbhai Bhuva and Shri Anup Joshi without providing cross-examination and cross confrontation is gross violation of principle of natural justice and proceeding is bad in law. Even otherwise, statement recorded from the searched person may binding to him, but such statement cannot be binding to us. Therefore, entire assessment proceeding initiated and addition proposed without allowing opportunity to cross-examine the parties from whose possession alleged documents/data were seized is violative of principle of natural justice. As held by Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CIT in Civil Appeal No. 4228 of 2006 Statements recorded from third party behind the back and without providing an opportunity of cross-examination is having no evidentiary value. 9. It needs to mention that the provision of Section 132(4A) and Section 292C of the Act creates deeming fiction on the assessee subjected to search, wherein it may be presumed that any such document found during the course of search from the possession or control of person searched belongs to such person. However, in the case under consideration, it is an undisputed fact that the so-called documents/data has not been found from the possession of assessee, but the same were found from the possession of third party. Therefore, noting made in such document / data do not present a preponderance of probabilities so as to support the allegation of receipt of unexplained cash in the case of the assessee. 10. Having regards to the fact that assessee has not received any unaccounted cash as alleged, any action on the basis of so-called data / document found from the third-party premises would be based on the assumption, surmises and conjectures. Reliance placed on the following decisions:  Hon'ble Supreme Court of India in the case of UOI vs. Playworld Electronics Pvt. Ltd. &Ors. 1990 AIR 202, wherein, it is observed "...Even a great deal of suspicion, not possible to hold otherwise without evidence"  Hon'ble Supreme Court of India in the case of Raj Kumar Singh vs. State of Rajasthan in the Criminal Appeal No. 931-932 of 2009 observed: "Suspicion, however grave it may be, cannot take the place of proof, and there is a large difference between something that 'may be' proved and 'will be proved'. In a criminal trial, suspicion no matter how strong, cannot and must not be permitted to take place of proof. This is for the reason that the mental distance between may be' and must be' is quite large and divides vague conjectures from sure conclusions The large distance between 'may be' true and 'must be true, must be covered by way of clear, cogent and unimpeachable evidence produced by the prosecution, before an accused is condemned as a convict, and the basic and golden rule must be applied. In such cases, while keeping in mind the distance between may be true and 'must be' true, the court must maintain the vital distance between conjectures and sure conclusions to be arrived at, on the touchstone of dispassionate judicial scrutiny based upon a complete and comprehensive appreciation of all features of the case, as well as the quality and credibility of the evidence brought on record. The court must ensure, that miscarriage of justice is avoided and if the facts and circumstances of a case so demand, then the benefit of doubt must be given to the accused, keeping in mind that a reasonable doubt is not an imaginary, trivial or a merely probable doubt, but a fair doubt that is based upon reason and common sense".

 Hon'ble High Court of Gujarat in the case of DCIT vs. Prarthana Construction Pvt. Ltd. in Tax Appeal No. 79 of 2000 wherein it has been held that the Revenue would not be justified in resting its case on the loose papers and documents found from the residence of third party even if such documents contain narration of transaction with the assessee. 11. Therefore, in absence of any corroborative evidences or any nexus or live link in support of the so-called documents seized from the possession of third party, no addition could have been made in the case of the assessee. Reliance is placed on the decision of Hon'ble Jurisdictional High Court in the case of Pr. CIT vs. Himanshu Chandulal Patel in Tax Appeal No. 342/2019, wherein, the High Court has endorsed the view taken by ITAT as well as CIT(A) by relying on the decision of Delhi High Court in the case of Pepsi Foods Pvt. Ltd. (2015) 231 Taxman 58 (Delhi). In this case, Hon'ble Jurisdictional High Court opined that "It appears that the CIT, Ahmedabad by relying on the Delhi High Court decision in the case of Pepsi Foods Private Limited took the view that the satisfaction recorded by the Assessing Officer was not sufficient enough to proceed against the assessee by issuing notice under Section 153C of the Act. The CIT, Ahmedabad relied on the presumption under Section 292C(1) (i) of the Act, which provides that the document which is recovered from a person who was searched, would be belonging to that person. The CIT, Ahmedabad took the view there must be cogent and tangible material available with the Assessing Officer before he arrives at a satisfaction that the seized document did not belong to the searched person, but to someone else and such satisfaction cannot be on the basis of surmises and conjectures. 12. Reliance is also placed on the decision of Hon'ble Apex Court of India in the case of CIT vs. Sunita Dhhadda (2018) 100 taxmann.com 526 (SC) dismissing the SLP filed by revenue against decision of Hon'ble High Court of Rajasthan holding that If assessing officer wants to reply upon documents found with third parties, the presumption u/s 292C against assessee is not available. As per the principles of natural justice, the assessing officer is bound to provide the evidence to the assessee & grant an opportunity to cross-examination. Secondary evidences cannot be relied on as if neither the person who prepared the documents nor the witnesses are produced. The violation of the natural justice renders the assessment null and void. The department cannot be given a second chance. 13. Further, statement recorded from third person is not binding on us and we vehemently object the allegations / averments put forth in the show-cause notice on the basis of such statements. It is also a well settled proposition of law that no addition could have been made on the basis of documents or data seized from the premises of third party or statements recorded from third party in absence of any other corroborative evidences or cross-examination of witness. Reliance is placed on some of the decisions as under:  Hon'ble High Court of Gujarat in the case of ITO vs. Bharat A. Mehta (2015) 60 taxmann.com 31 (Gujarat) had endorsed the view taken by Hon'ble ITAT, Ahmedabad Bench 'B' in (2001) 116 Taxman 301 (Ahd) as under: The assessee's case that he paid only sale consideration of Rs. 6,12,000 was further corroborated by documentary evidence. The weighty evidence collected otherwise and not in presence of the assessee and which did not measure to the requirement of law was hardly of any avail to the revenue as it did not establish the case against the assessee. Having regard to all the circumstances mentioned above, it was to be held that addition of 'on-money' in the case of the assessee was unjustified. The addition of Rs. 5,22,500 was, accordingly, directed to be deleted.

 Hon'ble ITAT, "G" Bench, Mumbai in the case of JCIT (OSD) vs. Sanjay V. Parmar in ITA No. 3534/Mum/2019 13. .....When no material has been found that assessee has made any booking for the flat, a mere entry in a pen drive of a third party cannot ipso facto fasten the liability of on money transaction upon the assessee without further corroborative material brought on record.  Hon'ble ITAT, "D" Bench, Mumbai in the case of DCIT vs. Shri Manoj M. Desai in ITA No. 6301/Mum/2018 Hence in our considered opinion on the facts and circumstances of the case when the addition is solely based upon builder's employee statement, which has been retracted and without any corroborative material brought on record, the same is not sustainable. The case laws cited above duly support this proposition. As already noted above the assessing officer having not referred the matter to the DVO for valuation has committed a fatal error”.

In the light of these facts assessee case was selected for scrutiny under CASS to examine this issue and assessing officer has sought for assessee comprehensive substantiation of these claims of purchases for its explanation with supporting proofs as reconcilable with relevant sales on account of these purchases from M/s. Tirtha Gold. However assessee has submitted / claimed these purchases as involving accounted purchases against M/s. Tirtha Gold and claimed the same as indeed reconcilable with assessee purchase register / stock register and final sales register as forming part of books of accounts contrary to the findings of search as involving unaccounted transactions. However, to substantiate the same further, assessing officer sought assessee reconciliation of sales in ornaments visa-a-visa purchase of ornaments to explain the movement of these purchases in ornaments with description only as involving ultimate sales in ornaments as the sales details of the assessee indicates that ornament sales are of export only and accordingly in the absence of such reconciliation, assessing officer treated assessee book result as not reliable and thereby estimated such attributable profit on these purchases at 10% for Rs.1.67 lacs as explained in the assessment order. In the light of these facts for Rs.1.67 lacs as explained in the assessment on assessee is merely contending such purchases as only involving accounted and reconcilable purchases as admitted in the books of accounts against M/s. Tirtha Gold and related concerns and thereby pleaded to consider the same as explainable as per law. Further assessee is contending that contending that there exist no erroneous findings on assessee books of accounts as attributable to these purchases and thereby pleaded to such rejection of book result with consequent estimation of profit on these purchases as not maintainable and requested to consider. However, to substantiate the same, apparently assessee did not adduce any such reconcilable supporting proofs of chases routed through books of accounts comprehensively to reconcile the final sales in ornaments as observed and sought by assessing officer in the assessment order. In the light of these apparent discrepancies as attributable to assessee claims on these purchases, the books of accounts to that extent are to be treated as erroneous warranting to reject the book results for consequent estimation of reasonable profit as assessed by assessing officer as attributable to these unaccounted purchases as per the findings of search in the case of M/s. Tirtha Gold and related concerns. In the light of these facts apparently there exists no infirmity in the reasoning adduced by assessing officer in rejecting assessee books result to that extent as analyzed and discussed supra and thereby assessee relevant GOA as advanced on this analogy is to be treated as apparently not reconcilable as applicable to assessee facts of case. Further, assessee has placed reliance on various citations as per the submissions to hold the same as allowable and on perusal of facts of case / ratios of adjudication of the citations as applicable to assessee facts of case involving categorical search findings and assessee failures to reconcile purchases in ornaments reconciliation with final sales involving description of ornaments etc. as reasoned by assessing officer and the same are neither comparable nor equitable in its facts of case and ratios of adjudication apparently as per law. Further, assessee did not bring out such comparative analysis as applicable to assessee facts of case and ratios of adjudication as attributable to the citations as needed to adduce and thereby assessee mere contentions on this analogy is to be treated as not maintainable as per the facts of case and circumstances as explained above. Considering all these facts of case, apparently there exists no infirmity in the order of the assessing officer as per the facts available on record and in view of the same, assessee various inter-related /over-lapping contentions as advanced in grounds of appeal needs to be treated as not maintainable as per law. In the result, assessee appeal is dismissed as not maintainable as per facts available on record on merits as assessee is failed to adduce any such supporting workings/ evidences as needed to advance the grounds of appeal contrary to the search findings and analysis of assessing officer in the assessment order as attributable to ornaments purchases made with Tirtha group and related concerns. Accordingly, assessee appeal is dismissed as not maintainable as per law. Accordingly, assessee appeal against the assessment order u/s. 143(3) of I.T Act dated 28.03.2025 for AY 2023-24, is dismissed on merits as not maintainable as per law as above.”

In the result, appeal filed by the assessee, in ITA No. 822/Rjt/2025, is partly 14. allowed.

“Assessee engaged in electronic business filed loss return. Assessment was completed by making various additions on estimate basis. Said additions were deleted partly by Commissioner (Appeals) and further by Tribunal. High Court had upheld said deletion. Penalty was not sustainable”.

Sd/- [ Dr. Arjun Lal Saini ] लेखा सद�य/Accountant Member //True Copy// राजकोट/Rajkot िदनांक/Date: 07/09/2026 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order

Private Secretary ITAT, Rajkot

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