M/S. GOUTHAM JEWELLERS,CHENNAI vs. DCIT, CC-3(4), CHENNAI

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ITA 3356/CHNY/2026Status: DisposedITAT Chennai31 August 2026AY 2020-2110 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition was not sustainable as the Revenue failed to provide independent corroborative material linking the assessee to the alleged unaccounted transactions. The Tribunal emphasized that third-party records alone are insufficient without such corroboration and denied the opportunity for cross-examination.

What were the facts?

The assessee's appeals concerned additions made based on entries in a third-party software ('J-Pack') found during a search at MJPL, which allegedly represented unaccounted transactions. The assessee denied these transactions and provided supporting documentation.

What were the issues?

Whether additions based solely on third-party software entries, without corroborative evidence and without allowing cross-examination, are legally sustainable.

Which sections of the Income-tax Act were involved?

Section 132(4),Section 132(4A),Section 292C

AI-generated summary — verify with the full judgment below

Before: SHRI S.S. VISWANETHRA RAVI & SHRI S.R. RAGHUNATHA

Hearing: 21.08.2026Pronounced: 31.08.2026

आयकर अपीलीय अिधकरण, ’ ए ’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी एस.एस. िव�ने� रिव, �ाियक सद� एवं �ी एस.आर. रघुनाथा, लेखा सद� के सम$ BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER & SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. Nos. 3354, 3355, 3356 & 3357/Chny/2026 िनधा%रण वष%/Assessment Years: 2018-19, 2019-20, 2020-21, 2021-22 M/s. Goutham Jewellers, Vs. The Deputy Commissioner of Income 28, Jeenis Road, Tax, Saidapet, Chennai – 600 015. Central Circle -3(4), Chennai. [PAN: AAKFG-6298-C] (अपीलाथ'/Appellant) (()थ'/Respondent) अपीलाथ' की ओर से / Appellant by : Mr. D. Anand, Advocate ()थ' की ओर से/Respondent by : Ms. R. Anita, CIT सुनवाई की तारीख/ Date of hearing : 21.08.2026 घोषणा की तारीख /Date of Pronouncement : 31.08.2026 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:

These appeals filed by the assessee are directed against the separate orders all dated 28.04.2026 passed by the ld. Commissioner of Income Tax (Appeals), Chennai-20, for the assessment years 2018- 19, 2019-20, 2020-21 & 2021-22.

:-2-: ITA Nos: 3354 to 3357/Chny/2026

2.

Since issues raised in all four appeals of the assessee are similar

based on the same identical facts, with the consent of both the parties,

we proceed to hear the appeals together and pass consolidated order

for the sake of convenience.

3.

First we take up ITA No. 3354/Chny/2026 for AY 2018-19.

4.

At the outset, the ld.AR, Mr. D. Anand, Advocate, drew our

attention to the grounds of appeal and submits that the issue raised

before this Tribunal is covered by the various orders of this Tribunal on

the similar issue based on same identical facts. The ld.AR placed on

record order dated 20.07.2026 and drew our attention to the relevant paragraphs.

5.

The ld.DR, Ms. R. Anita, CIT, submits the said decision is not

applicable and distinguishable to the facts of the present case.

6.

In view of the same and on perusal of the said order, we note that issue raised in the present appeal are similar to the issue discussed by

the coordinate bench in the case of Mohamed Najeef in ITA Nos. 86 to

:-3-: ITA Nos: 3354 to 3357/Chny/2026

90/Chny/ 2026 vide order dated 20.07.2026. For better understanding

the relevant portion of the said order is reproduced herein below:

“13. Heard both parties and perused the material placed before us. We note that, a search action was conducted on 10.11.2020 at the premises of the MJPL, in the course of which, a pen drive was found which contained accounts 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 “SAFINA TENKASHI”. 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 the assessee has 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 bills/invoices copies for accounted purchases made from M/s MJPL and claimed that it had done only those transactions with MJPL which were recorded in its books of account and requested AO to accept the audited financial statement of the assessee. The AO 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 without considering the submissions made by the assessee on the reason that some of the transactions which have been recorded in the books of account of the assessee are also found recorded in the J-Pack account in the same manner and relying on the statements recorded of the searched person made the estimating addition of alleged unaccounted transactions found in ledger ‘SAFINA TENKASHI’. Therefore, according to AO the correctness of the entries in the J-Pack account cannot be denied by the assessee. In other words, 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 at 6,690.41 grams during the F.Y. 2020-21 Rs.2,98,59,634/- [i.e. 6,690.41 grams (7,114.7 minus 424.29) at the rate of Rs.4,463.05 per gram] on which he applied Gross profit

:-4-: ITA Nos: 3354 to 3357/Chny/2026

rate of 9.65% and made an addition of Rs.28,81,980/-. On appeal, the Ld.CIT(A) concurred with the action of the AO, which impugned action is under challenge before us.

14.

We find that the impugned addition hinges on the entries of ledger extract of “SAFINA TENKASHI” in the books of MJPL maintained in J-Pack software and the statements of Shri Kothari and Suresh Khatri of MJPL. The assessee has denied the unaccounted transactions before the ld.CIT(A) stating that the ledger found in MJPL records as “SAFINA TENKASHI” and asserted that it has purchased only 424.29 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 7,114.7 gms as per J-Pack ledger, only gold weighing 424.29 gms was accounted in the books of the assessee, hence according to AO, balance gold 6,690.41 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; are noted to be the reasons assigned 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/addition for the following reasons.

15.

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 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.

16.

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

:-5-: ITA Nos: 3354 to 3357/Chny/2026

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 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 Jewellery 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.

17.

According to us, ordinarily any unmatched 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 assessee’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. Such an omission on the part of AO in the given facts of the case vitiates the adverse view taken against the assessee that it indulged in unaccounted transaction with MJPL and the addition made is fragile for violation of natural justice.

18.

In our considered view, once the assessee had categorically denied having entered into any unaccounted transactions with M/s.MJPL and specifically disputed the correctness and authenticity of the entries appearing in the J-PACK application software, the burden shifted upon the AO to establish the veracity of such entries by conducting an independent enquiry. In such circumstances, the AO ought to have examined Shri Rajendra Kothari, who was responsible for maintaining the impugned records, so as to ascertain the true nature and correctness of the unmatched entries. Equally, the assessee ought to have been afforded an effective opportunity to cross- examine Shri Rajendra Kothari and Shri Suresh Khatri, particularly when their

:-6-: ITA Nos: 3354 to 3357/Chny/2026

statements were sought to be relied upon for fastening tax liability upon the assessee. This assumes greater significance in the present case since the assessee had denied having undertaken any unaccounted transactions with MJPL and the confirmation of accounts furnished by MJPL did not establish the existence of the alleged undisclosed transactions.

19.

In these circumstances, we are of the considered opinion that the impugned addition cannot be sustained merely on the basis of the entries contained in the J-Pack software. The assessee has neither admitted the correctness of the disputed entries nor accepted the contents of the J-Pack ledger insofar as they relate to the alleged unaccounted transactions. In the absence of any independent corroborative evidence establishing that the unmatched entries represented actual transactions undertaken by the assessee, the Revenue cannot seek to fasten liability solely on the basis of records maintained by a third party. It is a settled principle that entries recorded in the books or electronic records of another person, by themselves, do not constitute conclusive evidence against the assessee unless supported by cogent and independent material. Such corroborative evidence is conspicuously absent in the present case.

20.

We also find that the Co-ordinate Bench of this Tribunal, in the case of M/s.Indomal Jewellery v. ITO in ITA Nos. 2948 to 2952/Chny/2025, order dated 05.06.2026, while dealing with an identical set of facts and circumstances, held that an addition towards alleged unaccounted transactions, merely on the basis of entries appearing in third-party documents seized during the course of search, without any independent corroborative evidence establishing the assessee's involvement, is not legally sustainable. The Tribunal categorically observed that third-party records, in the absence of cogent and corroborative material linking the assessee with the alleged transactions, cannot, by themselves, constitute sufficient evidence for making an addition under the provisions of the Act.

21.

In the present case, the Revenue has also failed to bring on record any independent or corroborative material to establish that the impugned transactions represented the undisclosed income of the assessee. The addition has been made solely on the basis of entries found in third-party records, without any supporting evidence demonstrating their authenticity or nexus with the assessee. Therefore, in the present facts and circumstances of the case and respectfully following the ratio laid down by the Co-ordinate Bench in the aforesaid decision, which applies to the facts of the present case, we hold that the addition made by the AO and confirmed by the ld.CIT(A) is devoid of legal merit and cannot be sustained. Accordingly, we direct the AO to delete the addition made for the Assessment Year 2021-22, and the grounds raised by the assessee are allowed.

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22.

Since the facts, issues involved and the basis of the impugned additions are identical in the remaining assessment years, and no distinguishing feature either on facts or in law has been pointed out by the Revenue, the findings and conclusions recorded by us for the Assessment Year 2021-22 shall apply mutatis mutandis to Assessment Years 2017-18, 2018-19, 2019-20 and 2020- 21. Accordingly, the additions sustained by the learned CIT(A) for the said assessment years are also directed to be deleted.”

7.

On perusal of the above, we find force in the arguments of the

ld.AR that the issues raised in the present appeal are similar to the facts

of the above said case. We find that the impugned addition was made

on the basis of entries of ledger extract of “SUNIL NAHAR” in the books

of MJPL maintained in J-Pack software and the statements of Shri

Kothari and Suresh Khatri of MJPL and the assessee has denied the

unaccounted transactions stating that the ledger found in MJPL records

as “SUNIL NAHAR”, and filed relevant evidence like bills/invoices, books

of account and payments made through banking channel. The AO didn’t

accept the denial of unaccounted purchases. We agree with the Ld.AR

that, the assessee cannot be expected to prove a negative and 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.

:-8-: ITA Nos: 3354 to 3357/Chny/2026

8.

We find the AO to enquire and bring corroborative evidence

against assessee, especially when assessee has denied such

transaction. However, the AO despite assessee’s denial has not

enquired about the veracity of such entries found in the ledger of MJPL

and has further refused to allow cross-examination of the makers of

statement on behalf of MJPL. In our opinion, once the assessee had

categorically denied having entered into any unaccounted transactions

with M/s.MJPL and specifically disputed the correctness and authenticity

of the entries appearing in the J-PACK application software, the burden

shifted upon the AO to establish the veracity of such entries by

conducting an independent enquiry. Thus, grounds raised by the assessee are allowed.

9.

Now let us take up ITA No. 3355/Chny/2026 for AY 2019-20:

10.

We find issue raised in this appeal are similar to the issue raised

in ITA No. 3354/Chny/2026, wherein we deleted the addition made by

the AO by following the coordinate bench order in the case of Mohamed Najeef (Supra). We find the decision taken by us in ITA No.

3354/Chny/2026 is equally applicable in this appeal also. Thus, order of

:-9-: ITA Nos: 3354 to 3357/Chny/2026

the ld.CIT(A) is set aside and grounds raised by the assessee are allowed.

11.

Next we take up ITA No. 3356/Chny/2026 for AY 2020-21. 12. We find issue raised in this appeal are similar to the issue raised in ITA No. 3354/Chny/2026, wherein we deleted the addition made by the AO by following the coordinate bench order in the case of Mohamed Najeef (Supra). We find the decision taken by us in ITA No. 3354/Chny/2026 is equally applicable in this appeal also. Thus, order of

the ld.CIT(A) is set aside and grounds raised by the assessee are allowed.

13.

Now let us take ITA No. 3357/Chny/2026 for AY 2021-22. 14. We find issue raised in this appeal are similar to the issue raised in ITA No. 3354/Chny/2026, wherein we deleted the addition made by

the AO by following the coordinate bench order in the case of Mohamed Najeef (Supra). We find the decision taken by us in ITA No. 3354/Chny/2026 is equally applicable in this appeal also. Thus, order of

the ld.CIT(A) is set aside and grounds raised by the assessee are allowed.

:-10-: ITA Nos: 3354 to 3357/Chny/2026

15.

In the result, appeals filed by the assessee is ITA Nos. 3354, 3355, 3356 & 3357/Chny/2026 are allowed. Order pronounced on 31st August, 2026 at Chennai.

Sd/- Sd/- (S.R. RAGHUNATHA) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated: 31.08.2026 JPV आदेश की (ितिलिप अ.ेिषत/Copy to: 1. अपीलाथ'/Appellant, 2.()थ'/ Respondent, 3. आयकर आयु//CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय (ितिनिध/DR & 5. गाड% फाईल/GF

PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.09.01 15:25:42 +05'30'

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