JOINT COMMISSIONER OF INCOME TAX (IN-SITU), PATNA vs. PAWAN KUMAR KHEMKA, PATNA

Per Rajesh Kumar, AM:

This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), patna-3(hereinafter referred to as the “Ld. CIT(A)”] dated 26.12.2024 for the AY 2018-19.

2.1. The issue raised by the Revenue is against the deletion of addition of ₹2,36,89,851/- on account of disallowance of purchase.

2.2. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee after taking into account the submission and contention of the assessee by holding that the assessee had made purchases of gold jewellery from the customers for which the assessee furnished the details from 01.07.2017 to 31.03.2018, along with invoices, wherein credit of old purchases were given to the customers. The ld. CIT (A) noted that this amount included the amount of jewellery received from the proprietor of ₹43,20,822/- on 03.03.2018. Besides, the ld. CIT (A) noted that the assessee has purchased old silver items from the customers qua which the assessee also furnished the necessary evidences. Therefore, the total old gold and old silver purchases comes to ₹2,37,40,194/-, which has been sufficiently explained. The ld. CIT (A) deleted the addition by observing and holding as under:-

“The above action of the AO is not sustainable During the course of appellate proceedings, the appellant has furnished a complete table of old gold purchases made during the period from 01.07.2017 to 31.03.2018 and break up of sales against old gold, and amount paid to customers against return of old items and copy of bank account statements where amount is paid through bank, copy of purchase ledger (old gold purchases) and a copy of few purchases invoices and sales invoices to prove the genuineness of such payments made against purchase of old gold. On perusal of the same it is noticed that during the year under consideration the appellant acceptedold gold jewellery and silver items from customers in exchange for sales made to them,

4.1. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by observing and holding as under: -

“On perusal of matenal available on record, it is noticed that a survey u/s. 133A of the IT Act, 1961 was conducted in the business premises of the appellant on 04.08.2016 Le during the FY 2016-17 by the DDIT(Inv.)-1, Patna. During the course of survey proceedings, inventory of stock was taken and it was found that there was shortage of stock valuing to Rs.43.20.822/-. In regard to shortage of stock the appellant claimed that the same was issued to the proprietor on 02.10.2016 and the price of the items are also same on 02 10.2016 as if the date of survey, i.e. 04.08.2016 and considered it as sale to proprietor and a sale invoice of Rs.43,20,822/- (including VAT of Rs 42.780/-) is raised on the proprietor and proprietor capital account was debited and this amount of deficit was considered as sell in the computation of income for the AY 2017-18 and gross profit @16.83% has been added to the total income to that year Further, the appellant stated that theamount of Rs.43,20,822/- was introduced as capital in the form of jewellery at same value to the firm in FY 2017-18which was issued to the proprietor Shri Pawan Kumar during the FY 2016-17.In support of his claim the appellant furnished copy of ledger account of proprietor Shri Pawan Kumar Khema in the books of M/s. Sevika Jewellers for FY 2016-178 FY 2017-18, Copy of computation of income for FY 2016-17, copy of invoice of Rs.43,20,822/-issued to proprietor etc. On perusal of ledger account of the proprietor Shri Pawan Kumar Khema in the books of M/s. Sevika Jewellers for FY 2016-17 and FY 2017-18, it is noticed that an amount of Rs.43,20,822/- was reflected as drawings in the proprietor capital during the financial year FY 2016-17. And this amount of Rs.43,20,822/- has been credited to the capital account of the proprietor and the jewellery returned being added to the stockon 31.03.2018 i.e. in the FY 2017-18. From the above discussion, it is clear that the appellant has not introduced any fresh capital in the firm during FY 2017-18, it was the same amount which was reflected as drawing in the proprietor capital during the last year FY 2016-17. In view of the above, the addition of Rs.43,20,822/- made by the AO on account capital introduction is hereby deleted. With these observations, the ground no.2 taken by the appellant is hereby allowed.” 4.2. After hearing the rival contentions and perusing the materials available on record, we find that a survey u/s 133A of the Act was

Order pronounced in the open court on 20.04.2026.

Sd/- Sd/- (DUVVURU RL REDDY) (RAJESH KUMAR) (VICE MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 20.04.2026 Sudip Sarkar, Sr.PS

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy// Asst. Registrar Income Tax Appellate Tribunal, Kolkata