INCOME TAX OFFICER, DELHI vs. JAI SHANTI ENTERPRISES, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, G: NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SMT. RENU JAUHRI, ACCOUNTANT MEMBER

ITA No.- 8460/Del/2025 [Assessment Year: 2017-18] ITA No.- 8515/Del/2025 [Assessment Year: 2018-19] ITA No.- 8516/Del/2025 [Assessment Year: 2018-19] Income Tax Officer, Jai Shanti Enterprises, Room No. 216, Block D, Vikas B-24/G-23, B Dilshad Garden, Bhawan, I.P. Estate, New Delhi- Vs Delhi-110095. 110002. PAN- AAMFJ0422F Revenue Assessee C.O. No.- 249/Del/2026 ITA No.- 8515/Del/2025 [Assessment Year: 2017-18] Jai Shanti Enterprises, Income Tax Officer, B-24/G-23, B Dilshad Garden, Room No. 216, Block D, Vikas Delhi-110095. Vs Bhawan, I.P. Estate, New Delhi- 110002. PAN- AAMFJ0422F Assessee Revenue Assessee by Sh. Sahil Gupta, Adv. Sh. Vikas Tiwari, Adv. Revenue by Sh. Rubal Singh, Sr. DR, Sh. Lalit Mohan Jindal, CIT(DR)

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises

Date of Hearing 06.08.2026 Date of Pronouncement 06.08.2026 ORDER Per Bench:

These three appeals by the revenue and one cross objection by the assessee are directed against the order dated 13.11.2025 and 17.11.2025 of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the assessment order and penalty order dated 15.12.2019 and 29.01.2022 passed under section 143(3) and 271AAC(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the ITO, Ward-59(6), Delhi, and Assessment Unit, National Faceless Assessment Centre (hereinafter referred to as the ‘AO’) pertaining to Assessment Years (A.Ys.) 2017-18 and 2018-19. 2. The Revenue has raised the following grounds of appeal (ITA No.- 8515/Del/2025) “1. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the penalty of Rs. 2,85,14,439/- without appreciating the fact that the assessee failed to establish the genuineness of the transaction in spite of ample opportunities provided to him by the AO during the course of assessment proceedings. 2. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred in holding that penalty u/s 271AAC of the Act is not leviable on additions made purely on estimated basis, without concrete evidence of actual concealment or specific undisclosed income falling u/s 68 to 69D of the Act ignoring the findings of the AO during the assessment proceedings that the assessee failed to substantiate the cash deposits and withdrawals reflecting in its bank account and that

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises the assessee did not provide the details of the persons with whom business of cash transactions was being carried. 3. That the order of the CIT(A) is erroneous and is not tenable on facts and in law. 4. That the grounds of appeal are without prejudice to each other. 5. That the appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

2.2. The Revenue has raised the following grounds of appeal (ITA No.- 8516/Del/2025) “1. Whether CIT(A) has on erred the facts and in the circumstances of the case and in Law, the Ld. in giving relief of Rs.36,72,73,367/- fact that the assessee failed without appreciating the spite of ample to establish the genuineness of the transaction in assessment proceedings. opportunities provided to him by the AO during the course of 2. Whether CIT(A) has on the facts and in the circumstances of the case and in Law, the Ld. 18,45,594/- erred as the in commission holding that only 0.5% of Rs. 36,91,18,961/- i.e. Rs. fact that the assessee income of the assessee without appreciating the the course of assessment had failed to establish that he was doing business during proceedings. 3. That appeal the before appellant or craves leave to add, alter or amend any/all of the grounds of during the course of the hearing of the appeal.

2.3 The Revenue has raised the following grounds of appeal (ITA No.- 8460/Del/2025) “1. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred in giving relief of Rs.11,56,19,000/- to the assesse without appreciating the fact that the assessee failed to establish the genuineness of the transaction in spite of ample opportunities provided to him by the AO during the course of assessment proceedings. 2. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) erred in holding that only 0.5% of Rs. 11,62,00,000, i.e. Rs. 5,81,000/- as the commission income of the assessee without appreciating the fact that the assessee had failed to establish that he was doing business during the course of assessment proceedings. 3. That the appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises 2.3 The Assessee has raised the following grounds of appeal (C.O. No.- 249/Del/2026) “1. That on the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) [hereinafter referred to as ld. CIT(A) has erred in sustaining an addition by estimating commission income at 0.5% of the total deposits, which is arbitrary, excessive, and contrary to the material on record. 2. That the Id. CIT(A), having correctly deleted the addition of ₹11,62,00,000/- made by the Assessing Officer under Section 69A of the Act, however Id. CIT(A)erred in proceeding to estimate commission income at 0.5% without any cogent basis, evidence, or comparable case to support such a high rate. 3. That the Id. CIT(A) failed to appreciate that the Cross Objector had consistently maintained that the commission earned from its business of cheque/draft discounting ranged between 250 to 200 per lakh, and the estimation at 2500 per lakh (0.5%) is therefore without any foundation and based on pure surmise and conjecture. 4. That, without prejudice to the above, the Id. CIT(A) erred in disregarding the principle of consistency by failing to consider that in the case of the Cross Objector's partner, Shri Mahender Kumar Gupta, for the same assessment year and for an identical business activity, the Department itself had accepted a commission rate of approximately 95 per lakh. 5. That the ld. CIT(A) erred in law by failing to appreciate the settled legal principle that only real income can be brought to tax, and not gross business receipts routed through a bank account. The impugned estimation results in the taxation of notional income, which is impermissible in law. 6. That, without prejudice to the foregoing grounds, the ld. CIT(A) ought to have restricted the estimation of commission income to a reasonable rate based on the evidence and facts available on record, including the rate applied in the case of the partner. 7. That the Cross Objector craves leave to add, alter, amend, or withdraw any of the grounds of cross objection at or before the time of hearing.”

2.4 As common issues and facts are involved in all the appeals are being disposed off vide common order and Ita No. 8460/Del/2025 for A.Y. 2017-18 is taken as the lead case.

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises ITA No.8460 and C.O. 249/Del/2026 3. Brief facts are that the assessee is running the business of cheques/ drafts discounting. It had filed return u/s 139(1) for A.Y. 2017-18 on 9.1.2018 declaring total income of Rs. 7650/-. The case was selected for scrutiny due to huge credits in the bank accounts. Subsequently, the AO completed the assessment u/s 143(3) determining the total income at Rs. 11,62,07,650/- by adding the entire credits in bank accounts as unexplained money u/s 69A of the Act as requisite evidences regarding nature of business were not furnished. 3.1 Aggrieved, the assessee preferred an appeal before the CIT(A). After considering the details filed before him, CIT(A) accepted the genuineness of assessee’s business activities but noted that very negligible income from commission @ 0.2% had been shown by if from the cheque discounting business. He, accordingly, estimated the commission income @ 0.5% and allowed part relief to the assessee by reducing the addition from 11,62,00,000/- to Rs. 5,81,000/-. 3.2 Aggrieved, with the CIT(A) order, the Revenue has filed appeal while the assessee has raised cross objections. 4. We have heard the rival submissions and perused the material available on record. Before us, Ld. AR has filed a written submission explaining the nature of business of the assessee. It has been submitted as under:

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises “4.1 That the Respondent, Jai Shanti Enterprises, is a Partnership Firm between Mr. Mahender Kumar Gupta S/o Late Jai Kirpal and Mrs. Amita Gupta W/o Sh. Mahender Kumar Gupta. Copy of partnership deed dated 26.05.2016 is attached herewith and marked as ANNEXURE-C. 4.2 That the principal operations of the firm were handled by Mr Mahender Kumar Gupta, who had been engaged in the business of cheque/draft discounting through various banks in Delhi for many years. It is submitted that Mr. Gupta used to receive bearer drafts from different parties in favour of the firm and, after deducting the agreed commission, made payment to such parties either in cash or through drafts. Subsequently, with the introduction of Core Banking Solutions (CBS), the manner of conducting such transactions underwent a significant change. Under the revised system, customers deposit cash directly into the Respondent's bank account from their respective hometowns before travelling to Delhi. Upon their arrival in Delhi, the Respondent releases an equivalent amount in cash to the customers after due verification of the deposit through net banking facilities and upon receipt of deposit slips shared through WhatsApp or email. It is further submitted that under the earlier draft discounting mechanism, customers had to bear two separate charges, first, at the time of issuance of the draft and second, at the time of encashment. However, under the current system, customers incur only a single commission charge at the time of receiving payment through agents such as the Respondent. 4.3 That service providers like the Respondent are essential because banks do not easily permit customers to withdraw funds from non-home branches. 4.4 That having regard to the nature of the Respondent's business, transactions were primarily executed and verified through banking channels and online banking facilities. Since payments were released only after confirmation of deposits through net banking and supporting deposit details received from customers, separate entry-wise books of account were not maintained in the conventional manner. The Respondent relied upon bank statements as the primary record of transactions and treated the same as reflecting the books of account for the purposes of the business.

4.1 It has been submitted by the Ld. AR that the nature of the business and the modus operandi had been accepted by the Tribunal in the case of Mahendra Kumar Gupta (HUF), and the matter was restored to the AO for determining the rate of commission in ITA No. 915/Del/2024 for A.Y. 2017-18. In the present case, Ld. CIT(A), while accepting the nature of the business of the assessee, has determined the commission income at 0.5%, which is on the higher side. Accordingly, against

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises the Revenue’s appeal, the assessee has filed a cross-objection on the ground that the rate of commission applied by the CIT(A) is excessive. 4.2 On the other hand, Ld. DR has argued that the requisite evidence was not produced before the Ld. AO by the assessee to establish the nature of its business. Therefore, the addition of the entire bank credits was rightly made by the AO and the Ld. CIT(A) accepted the assessee’s contention without proper verification. The Ld. DR has further submitted that the CIT(A) accepted the nature of the assessee’s business after considering the submissions made during the appellate proceedings, without seeking the comments or the remand report from the AO and hence Revenue is aggrieved. 5. We have heard the rival submissions and perused the material available on record. We are of the considered view that in the light of documents and details furnished by the assessee, the CIT(A) was justified in accepting the nature of its business and the modus operandi explained by it. Since the assessee had not maintained proper books of account in respect of its business activities, the Ld. CIT(A) had no option but to estimate the rate of commission income earned by it. After considering the submissions of the assessee and the nature of its business activities, the CIT(A) applied a commission rate of 0.5% on the total credits or turnover, which in our view, appears to be justified. Thus, we find no reason to interfere with the order of the Ld. CIT(A), who has passed a reasoned and speaking 7

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises order in this regard. Accordingly, the appeal of the Revenue as well as the Cross- Objections filed by the assessee are hereby dismissed. 6. In the result, Revenue’s appeal in ITA No.- 8460/Del/2025 and Assessee’s C.O. 249/Del/2026 both are dismissed.

ITA No.- 8516/Del/2025 (A.Y. 2018-19) 7. Since the facts and circumstances this appeal are identical to those involved in ITA No. 8460/Del/2025, the findings and decision rendered therein shall apply mutatis mutandis to the present appeal. 7.1 In the result, appeal of the Revenue is dismissed.

ITA No.- 8515/Del/2025 8. Brief facts of the case are that a penalty of Rs. 2,85,14,439/- was levied by the AO under section 271AAC of the Act in respect of the additions made under section 69A of the Act on account of unexplained bank credits, made in the assessment order. 8.1 Aggrieved by the said penalty order, the assessee preferred an appeal before the Ld. CIT(A). The penalty was deleted by the CIT(A) with the following observations: “6.2 As per the above provisions, the penalty u/s 271AAC of the Act is leviable when the income is determined u/ss 68, 69, 69A, 69B, 69C, 69D of the Act. In the instant 8

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises case, the Ld AO had made the additions u/s 69A of the Act. However, it is pertinent to point out that the Ld CIT(A) in the appeal order u/s 250 of the Act dated 14.11.2025, has restricted the addition to Rs.18,45,594/- and treated the same as Income from Business. Therefore, the income determined is under the head “business Income” and not under sections 68 to 69D of the Act. 6.3 The order of the Ld CIT(A) is passed after considering the facts of the case and the submissions of the appellant. The Ld CIT (A) has clearly deliberated on the findings of the Ld AO as well as that of the appellant and considering the business model of the appellant. It is an undisputed fact that Penalty under Section 271AAC of the Income Tax Act is not leviable on additions made purely on an estimated basis, without concrete evidence of actual concealment or specific undisclosed income falling under sections 68 to 69D of the Act. Additions based purely on estimation (e.g., estimating a certain profit percentage on alleged bogus purchases or general disallowance of expenses, or percentage estimation for arriving at Commission income - as in the instant case) are not considered "undisclosed income" in the specific sense required for penalty under Section 271AAC of the Act. Various Courts and tribunals have consistently held that a penalty cannot be sustained if the addition itself is an estimation exercise not backed by concrete proof of concealment. 6.4 Therefore, as the addition made u/s 69A of the Act in the assessment order has been deleted and as the restricted addition is treated as “Income from business”, it is held that the penalty u/s 271AAC of the Act is not leviable and the same is accordingly deleted. The appeal of the appellant is allowed.”

8.2 Aggrieved by the order of the CIT(A), the Revenue has filed the present appeal before the Tribunal challenging the deletion of the penalty. 8.3 Since the impugned addition which has been sustained in appeal, was based purely on estimation, we are of the considered view that the Ld. CIT(A) was justified in deleting the penalty, as the addition was not backed by any concrete proof of concealment.

ITA No.- 8460/Del/2025 and other appeals Jai shan� Enterprises 10. In result, this appeal of the Revenue is also dismissed. Order pronounced in the open court on 06.08.2026

Sd/- Sd/- [ANUBHAV SHARMA] [RENU JAUHRI] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated- 11.08.2026 Pooja, Sr. PS. Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi,