VIRINCHIPURAM RADHAKRISHNA NARAYANAN,VELLORE vs. DCIT CENTRAL CRICLE-3(3), CHENNAI

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ITA 2838/CHNY/2025Status: DisposedITAT Chennai05 May 2026AY 2018-1927 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty levied under Section 270A was unsustainable. It found that the evidence relied upon, primarily entries in third-party software, was unreliable and lacked corroboration, making it unsafe to impose a penalty.

What were the facts?

The assessee's case involved a search and seizure operation that led to the discovery of unaccounted gold transactions based on data from third-party accounting software. The Assessing Officer (AO) made an addition to the assessee's income and levied a penalty under Section 270A for underreporting income due to misreporting.

What were the issues?

Whether penalty under Section 270A can be levied based on unreliable third-party data without sufficient corroboration. Whether the assessment order under Section 153C was validly passed.

Which sections of the Income-tax Act were involved?

Section 270A,Section 153C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & MS. PADMAVATHY. S

Hearing: 28.04.2026Pronounced: 05.05.2026

आयकर अपीलीय अधिकरण, ’सी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI श्री एबी टी. वर्की, न्यायिर्क सदस्य एवं सुश्री पद्मावती. एस., लेखा सदस्य के समक्ष BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND MS. PADMAVATHY. S, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.2837 to 2841 /Chny/2025 ननिाारणवर्ा/Assessment Years: 2017-18 to 2021-22 v. Mr. Virinchipuram Radhakrishna The DCIT, Narayanan, Central Circle-3(3), 24/1, Officers Line, Vellore Chennai. Tamil Nadu-632 001. [PAN: AACPN0873G] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) आयकर अपील सं./ITA Nos.2836/Chny/2025 ननिाारणवर्ा/Assessment Years: 2021-22 v. M/s V Chetty Radhakrishna The DCIT Central Circle-3(3), Chetty Jewel Craft Firm Chennai. No.24/1, Anna Salai, Vellore, Tamil Nadu-632 001. [PAN: AASFV3954G] : (अपीलार्थी/Appellant) Mr.T. Banusekar, Advocate प्रत्यर्थी की ओर से /Respondent by : Ms. R. Anitha, Addl.CIT सुनवाईकीतारीख/Date of Hearing : 28.04.2026 : घोर्णाकीतारीख /Date of Pronouncement 05.05.2026 आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee individual & Firm against the order of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai-20, all dated 09.09.2025 for the Assessment Years (hereinafter referred to as ‘AY‘) 2017-18 to 2021-22.

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 2 :: 2. Since the issues involved are common, and the appeals for all the assessment years were heard together and both the parties argued them together raising similar arguments on the issues, accordingly, for the sake of convenience and brevity, we dispose of the appeals by this consolidated order.

3.

The sole issue permeating in all these appeals is concerning the penalty levied by the AO u/s.270A(9)(e) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), based on the addition (estimated G.P addition) pursuant to assessment made u/s.153C of the Act.

4.

First, we will deal with ITA No.2837 to 2841/Chny/2025 i.e. appeals preferred by individual-assessee. Both sides agree that facts and the issue involved are identical in all appeals. Hence, we take up the appeal for AY 2021-22, which decision will apply mutatis mutandis for other appeals. Before adverting to the grounds raised by the assessee, we first consider it fit to cull out the basic facts in the case by referring to the facts for AY 2021-22. The assessee an individual, proprietor of M/s V Chetty Radhakrishna Chetty Craft is engaged in the business of manufacturing of gold jewellery, silver articles and diamond jewellery. The assessee filed his return of income for AY 2021-22 on 24.02.2022 declaring a total income of Rs.8,34,50,250/-. A search u/s.132 of the Act was conducted on 10.11.2020 in the case of M/s Mohanlal Jewellers

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 3 :: Chennal Pvt Ltd (in short ‘MJPL’) and other related persons. During the course of the search, certain electronic records including desk-top data and pen drives containing information from the “J-Pack” accounting software were seized which inter alia contained incriminating material having a bearing on the total income of the assessee. The case of the assessee was centralized on 10.03.2023 and thereafter the case for captioned assessment years were reopened u/s.153C of the Act by issuing notice on 13.03.2023.

5.

The AO observed that the statements of certain persons including Shri Rajendra Kothari of MJPL were recorded u/s.132(4) of the Act, wherein it was stated that “J-Pack” software inter alia contained details of transactions relating to purchase and sale of gold made outside the regular book of accounts. On examination of the data retrieved from the “J-Pack” software, the AO of the searched person noticed a ledger account in the name of “VCRC”, which was allegedly linked to the assessee. The ledger reflected the transactions of purchase of gold jewellery ornaments. Shri Rajendra Kothari, in his statement recorded u/s.131 of the Act dated 30.11.2020, had identified that the said ledger pertains to M/s V Chetty Radhakrishna Chetty Jewel Craft (Proprietary concern of assessee). Further, Shri Suresh Khatri in response to question No.27 in statement recorded u/s.131 dated 04.12.2020 concurred with the statement given by Shri Rajendra Kothari and identified that the ledger pertains to the

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 4 :: assessee (M/s V Chetty Radhakrishna Chetty Jewel Craft). Having regard to the details of the opening and closing balances recorded under the ledger “VCRC” in the “J-Pack” software of MJPL, the AO tabulated the data concerning the assessee which is found at Page No.3 of the assessment order. The AO is noted to have provided the copy of the ledger extracted from “J-Pack” software and asked the assessee to explain the transactions maintained in the ledger extract from the “J-Pack” software along with documentary evidences. Pursuant to which the AO notes that assessee filed his reply along with copy of bank statement, invoices and ledgers in respect of sale/purchase made with the M/s MJPL. The AO noted that the assessee has also furnished reconciliation statement of the transactions recorded in the “Tally Data” and “J-Pack” ledger. The AO further noted in the assessment order for AY 2021-22 that in this Financial Year, the proprietary concern was taken over on 01.10.2020 by a partnership (Firm) known as M/s V Chetty Radhakrishna Chetty Jewel Craft-Firm bearing PAN No. AASFV3954G which was incorporated on 31.10.2019 but commenced business on 01.10.2020 [i.e.assessee-Firm-ITA Nos.2836/Chny/2025]. Thus, the business of the proprietary concern of the assessee (M/s V Chetty Radhakrishna Chetty Jewel Craft) was taken over by the Firm on 01.10.2020. Thereafter, the AO verified the transaction recorded in the “J-Pack” ledger pertaining to A.Y.2021-22 made with MJPL recorded in the books of the assessee till 01.10.2020.

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 5 :: The AO is noted to have analyzed the seized material and thereafter quantified the unaccounted transactions conducted by the assessee during the period from 01.04.2020 to 01.10.2020 at Rs.45,48,740/- on which he applied gross profit rate of 13.53% and made addition of Rs.6,15,445/-. The assessee is noted to have not preferred any appeal before the Ld.CIT(A) and remitted tax pursuant to the assessment order passed by the AO dated 31.03.2023 u/s.153C of the Act. Thereafter, the AO is noted to have issued notice u/s.270A of the Act proposing to levy penalty qua the unaccounted income estimated by the AO by notice dated 31.03.2023 alleging underreporting of income in consequence of misreporting u/s.270A(9)(e) of the Act. In response, the assessee contested the proposal to levy penalty and submitted, inter-alia, that assessee cannot be penalized for an entry made by a 3rd party in its ledger. The assessee submitted that mere entries in the “J-Pack” ledger found in the premises of 3rd Party/MJPL cannot be basis to fasten penalty without corroborative evidence. According to assessee, other than the entry made in the 3rd party ledger, there is no evidence to show that the assessee has made purchase of gold weighing 1019.2 not recorded in the assessee’s book. Hence, such entries cannot be the sole basis for making additions and pleaded that proposed penalty should be dropped. However, the AO took note of the fact that assessee has shown in its books of account to have purchased gold from MJPL to the tune of

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 6 :: 5649.81 grams which tallied with the ledger of MJPL(J-Pack) but assessee failed to account for the complete purchases from MJPL since ledger of MJPL “J-Pack” showed that it has issued 6669.01 grams of gold to assessee, hence, according to the AO, the assessee has not accounted in its books the purchase of 1019.2 grams of gold (6669.01-5649.81), which omissions on part of assessee tantamount to underreporting of income in consequence of misreporting and attracts penalty u/s.270A(9)(e) of the Act and therefore levied a penalty of Rs.5,26,134/- (200% of Rs.2,63,067/-).

6.

Aggrieved the assessee preferred an appeal before the Ld.CIT(A) who confirmed the same.

7.

Aggrieved the assessee is before us. The Ld.AR of the assessee assailing the action of the Ld.CIT(A)/AO submitted that the Ld.CIT(A) erred in confirming the penalty. According to him, it is settled that penalty proceedings are distinct and independent from assessment proceedings and consequently, the assessee is entitled to contest the imposition of penalty independently even if no appeal was filed against the quantum assessment order. The Ld.AR submitted that the contents of the ledger extracted from the “J-Pack” software of MJPL is riddled with inaccuracies, so it is unreliable and hence no penalty is leviable based on unreliable ledger. For such a proposition, he invited our attention to the “J-Pack”

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 7 :: ledger extracts of ‘VCRC’ in the books of MJPL (as per the J-Pack software for Financial Year 2016-17, relevant to AY 2017-18 to AY 2021-22) found kept in paper book at Page No.1 to 27 and also the “J-Pack” ledger qua the Firm which is kept at Page No.28 to 29, basis AO has quantified the purported unaccounted transaction allegedly conducted by the assessee on which he applied gross profit and made the addition while passing the quantum order u/s.153C order for the captioned assessment years. Drawing our attention to the ledger extract of “VCRC” in the books of MJPL as per the “J-Pack” software for the F.Y.2020-21 relevant to A.Y.2021-22 placed at Page No.26 of the paper-book, he pointed out inter-alia the following discrepancy for AY 2021-22, which is noted as under:- ASSESSMENT YEAR: 2021-22 Tr. Code Receipt Issued Details Gross Touch Net Wt Amount Gross Touch Net Amount Wt 18/05 RATE 1000.000 100.00 1000.000 42000.00 PURCHASE 11/09 RATE 0.020 14,850 2.970 150.74 PURCHASE (a) In the transaction dated 18.05.2020, the contents of the said entry suggests that 1000.000 gms of gold (1000.000 gms net) have been given by the assessee to MJPL only for Rs.42,000/- [should have been at least Rs.44,19,000, i.e., [(1000 /10) * 44,190] which is impossible since the gold rates for 10 gms gold were as follows:

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 8 :: ● 24 Carat gold rate as on 31.03.2021 – Rs.44,190 per 10 gms (Source: V.G.Mehta’s Income Tax Ready Reckoner – Enclosed separately) ● 22 Carat gold rate as on 31.03.2021 – Rs.40,508 per 10 gms ● 18 Carat gold rate as on 31.03.2021 – Rs.33,143 per 10 gms

Considering the above gold prices, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 18.05.2020, making such entry undependable. It may also be noted that the touch % (Purity of gold) is stated as 100% which is not possible in the jewellery business.

(b) Amidst all other entries in the J-Pack ledger where the quantity of jewellery is more than a bare minimum of 100 gms, in the transaction dated 11.09.2020, the quantity of jewellery dealt with is a mere 0.020 gms which is miniscule when compared to other entries. Also, the appellant being a wholesale manufacturer of gold jewellery would not have purchased or sold such miniscule quantity of jewellery. It may further be noted that the touch % (Purity of gold) is stated as 14,850% which is absurd and not possible in the jewellery business.

8.

Likewise, the Ld.AR invited our attention to page no.1 of Paper Book, wherein the ledger “VCRC” extracted from the JPACK software reflecting transactions for the assessment year 2017-18 are found placed,

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 9 :: he pointed out inter-alia the following discrepancy for AY 2017-18, which is noted as under:- ASSESSMENT YEAR: 2017-18

Tr. Code Details Receipt Issued Gross Touch Net Wt Amount Gross Touch Net Amount Wt 22/04 METAL 0.320 100.00 0.320 RECEIPT WT DIFF. 27/04 METAL 995.000 100.00 995.000 RECEIPT BULLION / BILL MJPL 10/05 RATE 526.320 95.00 500.000 15175.00 PURCHASE 12/05 RATE 414.510 95.00 393.780 11892.20 PURCHASE (a) Amidst all other entries in the J-Pack ledger where the quantity of jewellery is more than a bare minimum of 100 gms, in the transaction dated 22.04.2016, the quantity of jewellery dealt with is a mere 0.320 gms which is miniscule when compared to other entries. Also, the appellant being a wholesale manufacturer of gold jewellery would not have purchased or sold such miniscule quantity of jewellery. It may further be noted that the touch % (Purity of gold) is stated as 100% which is not possible in the jewellery business. (b) In the transaction dated 27.04.2016, the touch % (Purity of gold) is stated as 100% which is not possible in the jewellery business. The maximum possible touch for bullion is 99.5 to 99.9%.

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 10 :: (c) In the transaction dated 10.05.2016, the contents of the said entry suggests that 526.320 gms of gold (500 gms net) have been given by the appellant to MJPL only for Rs.15,175/- [should have been at least Rs.14,38,750, i.e., [(500 /10) * 28,775] which is impossible since the gold rates for 10 gms gold were as follows: ● 24 Carat gold rate as on 31.03.2017 – Rs.28,775 per 10 gms (Source: V.G.Mehta’s Income Tax Ready Reckoner – Enclosed separately) ● 22 Carat gold rate as on 31.03.2017 – Rs.26,377 per 10 gms ● 18 Carat gold rate as on 31.03.2017 – Rs.21,581 per 10 gms (d) Considering the above gold prices, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 10.05.2016, making such entry undependable.

(e) Similarly, in transaction dated 12.05.2016, the contents of the said entry suggests that 414.510 gms of gold (393.780 gms net) have been given by the appellant to MJPL only for Rs.11,892.20/- [should have been at least Rs.11,33,102, i.e., [(393.780 /10) * 28,775] which is impossible considering the gold rates for 10 gms gold as stated in Point No.3 above. Thus, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 12.05.2016, making such entry undependable.

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 11 ::

(f) Discrepancies regarding touch % can also be found in transaction dated 01.06.2016 where touch % is stated as 229.41% (Refer Page 2 of PB) and also in transaction dated 10.06.2016 where touch % is stated as 16.55% (Page 2 of PB).

9.

Likewise, the Ld.AR invited our attention to page no.1 of Paper Book, wherein the ledger “VCRC” extracted from the JPACK software reflecting transactions for the assessment year 2018-19 are found placed, he pointed out inter-alia the following discrepancy for AY 2018-19, which are noted as under: - ASSESSMENT YEAR: 2018-19

Tr. Code Details Receipt Issued Gross Touch Net Wt Amount Gross Touch Net Amount Wt 26/08 METAL 5.000 100.00 5.000 RECEIPT 07/09 RATE 955.260 95.40 911.320 28451.41 PURCHASE (a) Amidst all other entries in the J-Pack ledger where the quantity of jewellery is more than a bare minimum of 100 gms, in the transaction dated 26.08.2017, the quantity of jewellery dealt with is a mere 5.000 gms which is miniscule when compared to other entries. Also, the appellant being a wholesale manufacturer of gold jewellery would not have purchased or sold such miniscule quantity of jewellery. It may further be noted that the

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 12 :: touch % (Purity of gold) is stated as 100% which is not possible in the jewellery business.

(b) In the transaction dated 07.09.2017, the contents of the said entry suggests that 955.260 gms of gold (911.320 gms net) have been given by the appellant to MJPL only for Rs.28,451.41/- [should have been at least Rs.28,09,560, i.e., [(911.320 /10) * 30,830] which is impossible since the gold rates for 10 gms gold were as follows:

● 24 Carat gold rate as on 31.03.2018 – Rs.30,830 per 10 gms (Source: V.G.Mehta’s Income Tax Ready Reckoner – Enclosed separately) ● 22 Carat gold rate as on 31.03.2018 – Rs.28,260 per 10 gms ● 18 Carat gold rate as on 31.03.2018 – Rs.23,125 per 10 gms Considering the above gold prices, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 07.09.2017, making such entry undependable.

10.

Likewise, the Ld.AR invited our attention to page no.1 of Paper Book, wherein the ledger “VCRC” extracted from the JPACK software reflecting transactions for the assessment year 2019-20 are found placed, he pointed out inter-alia the following discrepancy for AY 2019-20, which are noted as under: -

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 13 :: ASSESSMENT YEAR: 2019-20 Tr. Code Details Receipt Issued Gross Touch Net Wt Amount Gross Touch Net Amount Wt 09/12 RATE 24.470 128.16 31.360 1019.20 PURCHASE METAL NIL 17/12 RATE 2083.330 96.00 2000.000 64800.00 PURCHASE

(a) In the transaction dated 09.12.2018, the touch % (Purity of gold) is stated as 128.16% which is not possible in the jewellery business.

(b) In the transaction dated 17.12.2018, the contents of the said entry suggests that 2083.330 gms of gold (2000.000 gms net) have been given by the appellant to MJPL only for Rs.64,800/- [should have been at least Rs.63,53,000, i.e., [(2000 /10) * 31,765] which is impossible since the gold rates for 10 gms gold were as follows:

● 24 Carat gold rate as on 31.03.2019 – Rs.31,765 per 10 gms (Source: V.G.Mehta’s Income Tax Ready Reckoner – Enclosed separately) ● 22 Carat gold rate as on 31.03.2019 – Rs.29,118 per 10 gms ● 18 Carat gold rate as on 31.03.2019 – Rs.23,823 per 10 gms

Considering the above gold prices, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 17.12.2018, making such entry undependable.

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 14 :: 11. Likewise, the Ld.AR invited our attention to page no.1 of Paper Book, wherein the ledger “VCRC” extracted from the JPACK software reflecting transactions for the assessment year 2020-21 are found placed, he pointed out inter-alia the following discrepancy for AY 2020-21, which are noted as under: - ASSESSMENT YEAR: 2020-21

Tr. Code Details Receipt Issued Gross Touch Net Wt Amount Gross Touch Net Amount Wt 17/02 METAL 1.200 100.00 1.200 RECEIPT 27/02 RATE 520.830 96.00 500.000 21950.00 PURCHASE (a) Amidst all other entries in the J-Pack ledger where the quantity of jewellery is more than a bare minimum of 100 gms, in the transaction dated 17.02.2020, the quantity of jewellery dealt with is a mere 1.200 gms which is miniscule when compared to other entries. Also, the appellant being a wholesale manufacturer of gold jewellery would not have purchased or sold such miniscule quantity of jewellery. It may further be noted that the touch % (Purity of gold) is stated as 100% which is not possible in the jewellery business.

(b) In the transaction dated 27.02.2020, the contents of the said entry suggests that 520.830 gms of gold (500.000 gms net) have been given by the appellant to MJPL only for Rs.21,950/- [should have been at least Rs.21,58,650, i.e., [(500 /10) *

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 15 :: 43,173] which is impossible since the gold rates for 10 gms gold were as follows:

● 24 Carat gold rate as on 31.03.2020 – Rs.43,173 per 10 gms (Source: V.G.Mehta’s Income Tax Ready Reckoner – Enclosed separately) ● 22 Carat gold rate as on 31.03.2020 – Rs.39,575 per 10 gms ● 18 Carat gold rate as on 31.03.2020 – Rs.32,380 per 10 gms Considering the above gold prices, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 27.02.2020, making such entry undependable.

V CHETTY RADHAKRISHNA CHETTY JEWEL CRAFT [FIRM] – ITA NO.: 2836 / CHNY / 2025

12.

Likewise, the Ld.AR invited our attention to page no.1 of Paper Book, wherein the ledger “VCRC” extracted from the JPACK software reflecting transactions for the assessment year 2021-22 are found placed, he pointed out inter-alia the following discrepancy for AY 2021-22, which are noted as under: -

ASSESSMENT YEAR: 2021-22

Tr. Code Details Receipt Issued Gross Touch Net Wt Amount Gross Touch Net Amount Wt 23/10 RATE 321.200 93.40 300.000 15936.00 PURCHASE 29/10 RATE 1052.630 95.00 1000.000 52750.00 PURCHASE

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 16 :: (a) In the transaction dated 23.10.2020, the contents of the said entry suggests that 321.200 gms of gold (300.000 gms net) have been given by the appellant to MJPL only for Rs.15,936/- [should have been at least Rs.13,25,700, i.e., [(300 /10) * 44,190] which is impossible since the gold rates for 10 gms gold were as follows:

● 24 Carat gold rate as on 31.03.2021 – Rs.44,190 per 10 gms (Source: V.G.Mehta’s Income Tax Ready Reckoner – Enclosed separately) ● 22 Carat gold rate as on 31.03.2021 – Rs.40,508 per 10 gms ● 18 Carat gold rate as on 31.03.2021 – Rs.33,143 per 10 gms Considering the above gold prices, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 23.10.2020, making such entry undependable.

(b) Similarly, in transaction dated 29.10.2020, the contents of the said entry suggests that 1052.630 gms of gold (1000 gms net) have been given by the appellant to MJPL only for Rs.52,750/- [should have been at least Rs.44,19,000, i.e., [(1000 /10) * 44,190] which is impossible considering the gold rates for 10 gms gold as stated in Point No.1 above. Thus, one may note that there is no correlation between the quantity and the amount mentioned in entry dated 29.10.2020, making such entry undependable.

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 17 :: 13. In the light of the aforesaid glaring discrepancies, the Ld.AR asserted that the addition made in the assessment order though accepted by the assessee to avoid litigation with the department cannot be the basis for levy of penalty u/s.270A of the Act; and asserted that in any case, it would be unsafe to levy penalty on the assessee, basis such unreliable ledger. Hence, he prayed for deletion of the penalty levied on the assessee and also relied on the decision of this Tribunal in the case of Sabari Diamonds & Jewels vs. DCIT copy placed in the paper-book at Page No.494 to 502 wherein the Tribunal was pleased to delete the penalty levied in similar factual circumstances pursuant to search and seizure in the premises of MJPL.

14.

Per contra, the Ld.DR relied on the impugned orders of the Ld.CIT(A)/AO and submitted that having accepted the GP addition made on account of unaccounted purchases from MJPL and having not declared the income from such transaction, the assessee is liable to penalty u/s.270A and hence, the AO levied penalty u/s.270A which has been rightly confirmed by the Ld.CIT(A) which action does not call for any interference from our part.

15.

Heard both parties and perused the material placed before us. We note that, a search action was conducted on the premises of the MJPL, in the course of it a pen drive was found which contained accounts

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 18 :: maintained in “J-Pack” software. The facts available on record shows that MJPL had admitted that the accounts maintained in its software contained both their unaccounted and accounted transactions and also offered additional income across several years with reference to the details and ledgers found therefrom. It is further observed that “J-Pack” software also contained ledgers of the parties with whom MJPL inter alia had unaccounted transactions and one of the ledgers was titled “VCRC”. It is seen that Shri Rejendra Kothari from whose possession this Pen-drive was found had explained the modus operandi for recording unaccounted transactions in these ledgers. It is also noted that Shri Suresh Khatri, key person of MJPL has confirmed the version of Shri Kothari. We observe that when assessee was confronted with this J-Pack ledger, he denied to have carried out any unaccounted purchases from MJPL and filed copy of the ledger of M/s MJPL in its book, along with copies of bank statement and reconciliation of issued & receipts and entries shown in “J-Pack” ledgers. The assessee also furnished invoices copies for accounted purchases made from M/s MJPL and making charges paid to M/s MJPL. The AO at Para 7.4 of the assessment order acknowledged that assessee denied the transaction as shown in the “J-Pack” account which have not been recorded in its (assessee’s) books of accounts. However, the AO brushed aside the denial made by the assessee on the reason that some of the transactions which have been recorded in the books of account of the

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 19 :: assessee are also found recorded in the J-Pack account in the same manner. Therefore, according to AO the correctness of the entries in the J-Pack account cannot be denied by the assessee. In other words, many of the transactions recorded by assessee in its book’s tallies with the J-Pack account in the same manner date wise. Hence, it is improbable that ledger maintained by MJPL in J-Pack software would be wrong. Further, according to AO, assessee failed to reconcile the unmatched entries, nor prove that it didn’t carry out unaccounted transaction with MJPL. Therefore, the AO rejected the denial of assessee and thereafter quantified the unaccounted transactions conducted by the assessee during the period from 01.04.2020 to 01.10.2020 at Rs.45,48,740/- on which he applied gross profit rate of 13.53% and made addition of Rs.6,15,445/-. However, the assessee is noted to have not contested the addition made by the AO estimating the GP on the unaccounted purchases/sales, but has contested the penalty levied u/s.270A(9)(e) of the Act.

16.

We find that the impugned penalty hinges on the quantum assessment made on the basis of ledger extract of VCRC in the books of MJPL maintained in J-Pack software and the statements of Shri Kothari and Suresh Khatri of MJPL. When confronted with the ledger extract of VCRC in the books of MJPL, the assessee is noted to have denied the unaccounted transactions and asserted that it has purchased only

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 20 :: 5649.81 gms of gold from MJPL (AY 2021-22), and filed relevant evidence like bills/invoices, books of account and payments made through banking channel. However, the AO didn’t accept the denial of unaccounted purchases because out of the gold issued weighing 6669.01 gms as per J- Pack ledger, only gold weighing 5649.81 gms was accounted in the books of the assessee, hence according to AO, balance gold 1019.2 gms needs to be treated as unaccounted purchases. Failure of the assessee to reconcile the unmatched entries, and failure to prove that it didn’t carry out unaccounted transaction with MJPL, were the reasons given to reject the assessee’s denial of carrying out any unaccounted transaction with MJPL. We do not agree with the reasoning given by the AO for fastening the liability as well as the penalty for the following reasons.

17.

We agree with the Ld.AR that, the assessee cannot be expected to prove a negative. Instead, the onus lay on the Revenue to substantiate the unmatched entries with some independent tangible material, if they were seeking to use the same against the assessee. According to us, the entries found in “J-Pack” application software which was seized from the premises of MJPL, could have been explained by MJPL alone. The case of the Revenue is that Shri Kothari of MJPL had claimed these entries to be unaccounted for, and thus it was rightly added in the hands of the assessee. On the other hand, the Ld.AR has submitted that, the statement given by Shri Kothari could have been in the context of the

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 21 :: books of account of the MJPL and not the assessee. The Ld.AR submitted that, the Shri Kothari who was an employee of MJPL could not have possibly known as to whether the assessee had accounted or not, these transactions in their books of account. He corroborated his submission by showing that majority of these entries were recorded in the books of account of the assessee. We also note that no opportunity to cross- examine Shri Kothari/Suresh Khatri was given to the assessee. We thus, find force in the Ld.AR’s plea that the statement of Shri Kothari cannot come to the aid of the AO to fasten a liability on the assessee without corroborative material which is absent in this case.

18.

It is settled that presumption set out in section 132(4), 132(4A) and 292C is only against the searched person which in this case is MJPL. Hence, contents of the material seized from the possession of the MJPL viz. entries in J-Pack application software seized from MJPL, can be presumed to be true only qua MJPL. Likewise, the statement of Shri Kothari recorded on the basis of material found in his possession can be used as valid evidence in the income tax proceedings of MJPL. Thus, said presumption cannot be extended to the assessee, unless the assessee was afforded an opportunity to cross-examine him. It is well settled in law that such 3rd party material or statement cannot be treated as conclusive proof against an assessee, unless there is other corroborative material linking the same to the assessee. Hence, we thus agree with the assessee

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 22 :: that the contents of J-pack software, which was unilaterally maintained by that party (MJPL) cannot be straight away used adversely against the assessee, without any corroborative material evidence. It is noted that assessee was able to substantially reconcile the entries out of the total entries found in the J-Pack application software. Insofar as the unmatched entries are concern, the assessee had contended that, these could have been mistakenly entered by Shri Rajendra Kothari in the software under the name of assessee. To support his contentions, he referred to certain contra entries, which suggest that when Shri Kothari identified the entries which were wrongly posted to the name of the assessee, he would pass a contra entry to transfer it to the correct head, which this Tribunal in identical facts and circumstances noted in Lalitha Jewelry Case [ITA Nos.675 to 680/Chny/2025 dt.12.06.2025]. We agree with the Ld AR that these unmatched entries could also be a case of incorrect accounting, mistaken identity or that the entries of some other customers were wrongly posted to these accounts.

19.

Moreover, the Ld AR for assessee has pointed out the glaring discrepancies in the ledger of the MJPL [“J-Pack”] which is not again discussed for the sake of brevity. Having noted the discrepancies, we are of the view that the ledger maintained by MJPL using J-Pack software is riddled with inaccuracies and hence it is unsafe to either fasten liability or levy penalty on the assessee. According to us, ordinarily any unmatched

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 23 :: entries with the books of 3rd party raises a suspicion against the assessee, then AO to enquire and bring corroborative evidence against assessee, especially when assessee has denied such transaction. However, the AO despite assesee’s denial has not enquired about the veracity of such entries found in the ledger of MJPL and has refused to allow cross- examination of the makers of statement on behalf of MJPL. Hence, in the given facts of the present case, having regard to the infirmities and inconsistencies pointed out in the entries maintained by the 3rd party in their application software as discussed above, there is merit in the case of assessee that the unmatched entries may not relate or pertain to it. 20. According to us, once the assessee had brought on record evidences and material which cast doubt on the veracity of the contents of the entries in the J-Pack application software, then not only the AO ought to have examined Shri Kothari to test the veracity of his statement but he also ought to have confronted Shri Kothari of M/s MJPL to ascertain the true content and nature of the unmatched entries. Also, an opportunity should have been given to the assessee to cross-examine Shri Kothari particularly when the assessee at all times had denied having any unaccounted transaction with MJPL and even MJPL had submitted their confirmation of accounts. In our considered view on the given facts, the assessee has shown that the contents of the J-Pack ledgers qua assessee is unreliable being riddled with inaccuracies; and anyway, it cannot be

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 24 :: held to be conclusive proof against the assessee, hence, it would be unsafe to fasten liability leave alone levy penalty u/s.270A of the Act. Therefore, in the light of fore going discussion, we are of the view that it is unsafe to sustain the penalty hence, we direct deletion of the penalty for AY 2021-22.

21.

No change in facts or law could be pointed out qua other captioned AYs, hence on the aforesaid reasoning, the penalty appeals of the assessee as well as that of assessee-Firm, for all other captioned assessment years are allowed on the basis of the same reasoning given for A.Y.2021-22. Thus, assessee succeeds and we direct the penalty to be deleted for all the assessment years.

22.

Before parting, we would like to note that Ld AR of assessee has inter-alia, raised legal issue challenging the action of the Income Tax Authorities imposing penalty u/s.270A of the Act, which according to him was without jurisdiction, illegal, bad in law and void ab-initio. The Ld.Counsel in support of the legal issue submitted that the impugned penalty order flows from the assessment order dated 31.03.2023 passed by AO u/s.153C r.w.s.143(3) of the Act was itself void ab-initio [refer the decision of the Hon’ble Madras High Court in the case of Hari Govind v. ACIT [2025] 180 taxmann.com 197 (Madras) as it is against the provisions of sub-section (3) of Section 153C of the Act]. Accordingly,

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 25 :: where the foundation/assessment-order itself was ‘null’ in the eyes of law, the action initiating penalty would be ‘null’ in the eyes of law. When such principle is applied in this case, the statutory notice dated 13.03.2023 by the AO initiating penalty u/s. 270A of the Act is wholly without jurisdiction and was issued without authority, non-est in eyes of law.

23.

The Ld.Counsel explained the legal issue by pointing out that in this case, ‘Satisfaction Note’ (before issuance of notice u/s.153C of the Act) was dated 13.03.2023, and hence, the date of initiation of search (for the purpose of section 153C of the Act) would be the date on which the materials/books of accounts, etc., are handed over to the JAO of the assessee/other-person; and then such a date would be considered as the date of initiation of search for the assessee/other-person for all purposes u/s 153C of the Act. Thus, in this case, according to the Ld.Counsel, since the date of recording of ‘Satisfaction Note’ is on 13.03.2023, the date of search should be deemed as 13.03.2023. And once the date of search is deemed to be 13.03.2023, according to the Ld.Counsel, then as per Section 153C(3), special provisions of Section 153C of the Act will not apply to a search initiated on or after 01.04.2021. Hence, according to the Ld.Counsel, the very act of AO recording ‘Satisfaction Note’ and the consequent issuance of notice dated 13.03.2023 by the AO is without any authority and contrary to sub-section (3) of Section 153C of the Act and therefore, resultant framing of assessment is non-est in the eyes of law.

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 26 :: For such a proposition, he cited the decision of the Hon’ble Madras High Court in the case of Harigovind v. ACIT [supra]. In such a scenario, according to the Ld.Counsel, the penalty imposed u/s.270A of the Act is unsustainable, since the foundation of the charge [‘underreporting of income in consequence of misreporting’] would not legally survive and consequent issue of notice of penalty u/s.270A of the Act dated 31.03.2023 is bad and the resultant penalty imposed on the assessee by order dated 23.09.2023 is null in the eyes of law.

24.

However, we are not inclined to answer the legal issue raised by assessee since it was brought to our notice that Hon’ble Division Bench of High Court has stayed the operation of the order passed in the case of Hari Govind v. ACIT (supra) and the appeal is listed for hearing only in June 2026. Hence the legal issue is left open.

25.

In the result, appeal of the assessee is allowed.

Order pronounced on the 5th day of May, 2026, in Chennai.

Sd/- Sd/- (पद्मावती .एस) (एबी टी. वर्की) (PADMAVATHY. S) (ABY T. VARKEY) लेखा सदस्य/ACCOUNTANT MEMBER न्यानयक सदस्य/JUDICIAL MEMBER चेन्नई/Chennai, ददनांक/Dated: 5th May, 2026. KB

ITA Nos.2836 to 2841/Chny/2025(AYs 2017-18 to 2021-22) Virinchipuram Radhakrishna Narayanan, V Chetty Radhakrishna Chetty Jewel Craft Firm :: 27 :: आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकरआयुक्त/CIT, Chennai / Madurai / Salem / Coimbatore. 4. विभागीयप्रविविवि/DR 5. गार्डफाईल/GF

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