RM APPAVU CHETTIAR JEWELLERY PIRVATE LIMITED,MADURAI vs. DCIT, CENTRAL CRICLE-3(3), CHENNAI, CHENNAI

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ITA 3397/CHNY/2025Status: DisposedITAT Chennai05 June 2026AY 2018-1919 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 'J-Pack' data, relied upon by the AO, contained significant infirmities and inconsistencies, such as impossible purity figures and miniscule transaction quantities. The Tribunal found that the assessee had denied unaccounted transactions and provided supporting documents like invoices and bank statements for its recorded purchases. Therefore, the addition based solely on the 'J-Pack' ledger was not sustainable.

What were the facts?

The assessee's appeals relate to additions made by the Assessing Officer (AO) based on unaccounted transactions with M/s Mohanlal Jewellers Pvt Ltd (MJPL), as indicated in MJPL's 'J-Pack' accounting software. The AO relied on data from this software, seized during a search at MJPL, which showed transactions with the assessee not fully reflected in the assessee's books.

What were the issues?

Whether the 'J-Pack' software data from a third party, containing alleged unaccounted transactions, can be solely relied upon for making additions against the assessee without corroborative evidence, especially when the assessee disputes its veracity and provides documentary evidence for its recorded transactions.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(2),Section 132(4),Section 131,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI S.R. RAGHUNATHA

Hearing: 12.05.2026Pronounced: 05.06.2026

आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the orders of the Learned Commissioner of Income Tax (Appeals), (hereinafter referred to as ‘Ld.CIT(A)’), Chennai-20, all dated 17.10.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2017-18 to 2021-22 respectively. 2. Since the issues involved are common, the appeals for all the assessment years were heard together. Both the parties also argued them together, raising similar arguments on the issues. Accordingly for the

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 2 :: sake of convenience and brevity, we dispose all the appeals by this consolidated order.

3.

Grievance raised by the assessee in all above appeals relate to the addition made by way of estimated income derived from unaccounted transactions with M/s Mohanlal Jewellers Pvt Ltd. (in short ‘MJPL’).

4.

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. Assessee is a company engaged in the business of manufacturing jewellery and ornaments. The assessee filed the return of income for A.Y.2021-22 on 12.01.2022 declaring a total income of Rs.7,96,20,180/-. Search u/s.132 of the Income Tax Act, 1961 (hereinafter referred to as “Act”) was conducted on 10.11.2020 in the case of M/s MJPL and other related persons. During the course of search, certain electronic records including desk-top data and Pen drive containing information from the “J-Pack” accounting software were seized which inter alia contained incriminating material having of bearing on the total income of the assessee. The case of the assessee was centralized on 17.06.2021 and thereafter the return was selected for scrutiny and notice u/s.143(2) was issued on 15.02.2022.

5.

The AO observed that statement 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 books of account. On examination of the data retrieved from “J-

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 3 :: Pack” software, the AO of the searched person analyzed ledger account in the name of “APPAVU MD”, which was 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 ledger pertains to the assessee M/s RM Appavu Chettiar Jewellery Pvt Ltd. Further, Shri Suresh Khatri, in response to question No.27 of his statement recorded u/s.131 of the Act dated 04.12.2020 has concurred with the statement given by Shri Kothari. Having regard to details of the opening and closing balances recorded under the ledger “APPAVU MD” 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, during the course of assessment proceedings, provided copies of the seized ledger named “APPAVU MD” extracted from “J-Pack” software to the assessee along with the notice u/s.142(1) of the Act dated 03.03.2022 and 13.12.2020 asked the assessee to explain the transactions entered in the ledger extracted from “J-Pack” software along with documentary evidences. In response, assessee filed its reply along with ledger copies in respect of the transactions made with the M/s MJPL, copies of invoices, copies of bank statement. And also filed reconciliation between the “J-Pack” ledger and tally ledger pertaining to the transactions made with the M/s MJPL. In its reply assessee submitted that the total gold purchases made by the assessee from MJPL is 15415.8 grams as recorded in its books of account for the said period (01.04.2020 to 10.11.2020) and contested the veracity of the purchase as shown in the “J-Pack” ledger as 32298.3 grams. The assessee asserted in its reply dated 19.12.2022, pursuant to the show- cause notice issued by the AO on 13.12.2022, that assessee has not carried out any purchase other than what has been recorded in its books of account and also that it has not made any cash payments to MJPL for

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 4 :: purchase of jewellery/bullion. In other words, assessee objected to the proposal made in the show-cause notice to tax the unaccounted purchase based on the “J-Pack” ledger found at the premise of MJPL of 16882.5 grams (32298.3 minus 15415.8) and asserted that entries found in the ledger from the 3rd Party premises cannot be used against it, in absence of any tangible material to corroborate the same. The reply of the assessee dated 19.12.2022 is reproduced as under: -

2.

It is mentioned in the notice that the Incometax Department had carried out search operations in respect of Mohanlal Jewellers P. Ltd, Shri Suresh Kumar Khatri and others and found that they had maintained personal computer and pen drive and from which the datas maintained in the name of APPAVU MD were furnished and directing us to furnish the particulars of transactions, the assessee had carried out with the said concern and how the particulars furnished in the notices are appearing in the books of accounts maintained by the assessee. 2.1 We would like to state that M/s. Mohanlal Jewellers P. Ltd is the supplier of the assessee. They used to bring jewellery to Madurai and show it to different customers including the assessee. On selecting the product and confirming the purchases of the selected products, rates will be finalised and thereafter the bill will be raised in the name of the assessee and the payments were settled by RTGS or bank transfers. The purchases effected by the asessee are properly recorded in the books of account and payments were effected through bank only. We had already furnished the purchase bill copies and bank statements highlighting the payments made for the said bills vide our earlier submission dated 10/01/2021 vide Speed Post on 11/01/2021. The sales effected by the assessee to Mohanlal Jewellery P.Ltd were also property recorded in the books of account and net payments were effected through bank only We are unable to understand the statements furnished by the department in respect of the transactions of Mohanlal Jewellery P. Ltd with the assessee stated therein. Therefore, we are unable to reconcile the Annexure furnished except the fact that the assessee had purchased from the above concern through proper hills and payments were made only through RTGS or bank transfers only. of complete details of transactions with documentary evidences. Hence the assessee is The assessee will be able to furnish the explanation or reconciliation only on furnishing not able to reconcile.

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 5 :: The assessee had not carried out any cash or metal transactions other than the accounted transactions. All the purchases and sales and payments were property accounted in the books and coples of the purchase bills. bank statements, sales bille were already submitted to the department by the assessee. Further we wish to state that the assessee vide its letter dated 02/02/2021 had submitted the following details for the period from 01/04/2014 to 31/12/2020:- a. Ledger account copy of Mohanlal Jewellers P. Ltd; b . The assessee's bank statement wherein the payments made to the abovesaid company was highlighted; c. Copies of the bills given by Mohanlal Jewellers P.Ltd. In the said letter, the assessee had also confirmed the fact that the assessee company had not dealt with Shri Suresh Khatri and others separately. Further in response to notice dated 18/12/2020, the assessee had furnished the details through its auditor's letter dated 10/1/2021 furnishing the details of purchase of bullions and ornaments for the financial years 2014-15 to 2020-21 invoice wise with quantity of purchase and purchase value. The copies of the purchase bills were already submitted to your office vide letter dated 02/01/2021. We are submitting copies of the following: a. Copy of letter dated 10/01/2021; b. Summary of yearwise Purchases break up for the periods 2014-15 to 31/12/2021 made from Mohanlal Jewellery P.Ltd; c. Break up of date wise purchase of bullion and gold ornaments from the above for the said periods. d. Xerox copy of Professional Courier sent on 02/01/2021. Therefore, all the purchases and sales from and to Mohanlal Jewellers P. Ltd and payments made to it are fully accounted for. 3. The bank statements of the assessee were already submitted and are available in the particulars earlier furnished. 4. In the abovesaid notice, Tabular Column wise datas were given year wise mentioning receipts and issues of quantity and the receipts and issues amount in cash. It is directed to explain the sources of cash payment as mentioned in the said tabular form for the Financial Year 2020-21 of Rs. 1,69,85,400/= under Receipt Head. On behalf of the above, we write to confirm that the assessee had not made any cash

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 6 :: payments to the above company for purchase of jewellery/bullion. All the payments were made only through bank transfers and RTGS and therefore we hereby deny having made the above said cash payment by the assessee. All the payments were properly recorded in the books of accounts of the assessee and therefore the question of cash payment and omission thereon does not arise. 5. The sales tax return copies will be uploaded shortly. We pray for 2 weeks’ time to obtain the same from VAT/GST return filing people and submit the same. 6. However, the AO is noted to have rejected the submissions put-forth by the assessee by observing as under: - (Para 7.3 Page No.4 of the Assessment Order for A.Y.2021-22)

7.3 The assessee made his submissions along with ledger copies in respect of the transactions made with M/s. Mohanial Jewellers Concerns, copies of invoices. copies of bank statements etc. The assessee also further submitted reconciliation between the J-pack ledger and tally ledger pertaining to the transactions made with M/s. Mohanlal Jewellers concerns. The assessee's submissions were duly considered and are dealt as under:

The assessee is trying to deny the transactions in the above discussed J pack account which have not been reflected in its books of account. From the manner and the details in which the entries have been made in the J pack accounts, it is clear that it cannot be a dumb document with mere random entries. In the account of the assessee and accounts of many other customers of Mohanlal Jewellers group, date wise details of business transactions have been recorded involving metal (gold) jewellery/bullion (gross and net weights), and amounts etc. Some of the transactions, which have been recorded in the books of accounts of the assessee, are also entered in the Jpack account in the same manner. Therefore, the correctness of the entries in Jpack account cannot be denied. These entries definitely show the business transactions which the assessee has done with MJPL group. The ledger extract is part of the seized records, and there is no basis to doubt its credibility. The analysis of the JPack entries done below will go to prove that the entries therein depict actual transactions between the assessee and Mohanlal Jewellers group. Also, Shri. Suresh Khatri, one of the main directors of M/s. Mohanlal Jewellers group concerns, in response to the Q.No. 27 of his statement recorded u/s. 132(4) of Income tax Act, 1961 dated 11.11.2020, has clearly stated that the specialized software named "JPACK" and the pen drives maintained by Shri. Rajendra Kothari, are utilized for the purpose of tracking all the accounted and unaccounted transactions. Further the assessee stated that it had received gold on approval basis from the M/s. Mohanlal Jewellers and after selecting the items, the balance ornaments had been returned to sales personnel

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 7 :: allocated by the M/s. Mohanlal Jewellers Concerns. The assessee's arguments is not acceptable as no documentary evidence had been submitted by the assessee in support of its claim. The assessee had not produced copy of any consignment account made, if any, for the purpose of recording the transactions relating to receipt of gold ornaments on approval basis and rejection of the same. Hence the objections of the assessee are devoid of merit. 7. 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 10.11.2020 (date of search of MJPL). The AO is noted to have analyzed the seized material and thereafter quantified the unaccounted transactions conducted by the assessee at 16882.5 grams during the period from 01.04.2020 to 10.11.2020 at Rs.7,53,47,272/- [i.e. 16882.5 grams (32298.3 minus 15415.8)] on which he applied gross rate of 16.22% and made addition of Rs.1,22,21,327/-. On appeal, the Ld.CIT(A) concurred with the action of the AO.

8.

Aggrieved the assessee is now in appeal before us. Assailing the action of the AO as well as Ld.CIT(A), the Ld.AR of the assessee inter alia contended that, the veracity of the entries found in the “J- Pack” software (ledgers with the name of ““APPAVU MD””) were never enquired by the AO independently before concluding the assessment proceedings. The Ld AR pointed out that impugned additions were solely based on the entries found in the ledger which assessee does not have any control, being found from the premise of third party/MJPL. According to the Ld.AR the ledger software “J- Pack”/ledger with acronym “APPAVU MD” was admittedly under the control of the employees of MJPL. Hence, whatever entries made therein cannot be used against the assessee to fasten liability over it unless there is corroborative material. According to the Ld.AR the impugned addition was only on speculation. The Ld.AR taking us

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 8 :: through the assessment order showed us that even though assessee contested the entries which were recorded in the ledger of MJPL (“J- Pack” software) the AO did not make any inquiry to summon Shri Rajendra Kothari or Suresh Khatri to establish the allegation that assessee had conducted unaccounted purchases with MJPL, which purchases are not recorded in the books of the assessee. Therefore, the Ld.AR submitted that the Ld.CIT(A) erred in confirming the GP addition based on entries made in the ledger maintained in the “J- Pack” software. In this regard, the Ld AR pointed out that the assessee had contested the veracity of the unaccounted purchases of gold weighing 16882.5 grams, then the AO ought to have summoned and examined the makers of the statement viz Shri Rajendra Kothari and Suresh Kothari and clarified from them and even allowed assessee to cross-examine them, without which, AO ought not to have drawn adverse view against the assessee. He thus wants us to delete the same.

9.

The Ld.AR relied on the decisions of this Tribunal rendered in the case of Kasthoori Raja Dhanush vs ACIT (ITA Nos.3188 to 3192/Chny/2024) in support of his contention that mere entry in the ledger bearing the name of “APPAVU MD” cannot be said to pertain to that of assessee and such entries cannot represent alleged transaction with the assessee. According to Ld AR, no material whatsoever has been bought on record to establish any such nexus between the said ledger and the assessee. The Ld.AR further alleged that the issue relating to the nature of entries recorded in the “J- Pack” software has been examined by this Tribunal in the case of MJPL wherein, according to him it was held that the mechanism of recording entries in the “J-Pack” software does not by itself, establish the nature, authenticity or taxability of the underlying transactions

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 9 :: recorded therein. Hence, even if assessee has recorded certain transaction which tallies with the entries found in J-Pack ledger of MJPL, that cannot be the basis for drawing adverse inference for entries which are not recorded in its book vis a vis that of the entries found in J-Pack ledger of MJPL as unaccounted transactions. Hence according to assessee, the entries maintained by the 3rd party in their application software alone cannot be held to be conclusive proof against the assessee, hence, it would be unsafe to fasten addition in the hands of assessee. Therefore, the Ld AR pleaded for deleting the addition.

10.

Per contra the Ld.DR fully supported the action of both the Ld.CIT(A) as well as the AO and does not want us to interfere with the impugned action of the Ld.CIT(A).

11.

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 “APPAVU MD”. 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-

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 10 :: Pack ledger, 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 copies of bills/invoices pertaining to 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 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 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, 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. Furher, 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 having carried out any unaccounted transaction with MJPL; and thereafter quantified the unaccounted transactions conducted by the assessee at 16882.5 grams during the period from 01.04.2020 to 10.11.2020 at Rs.7,53,47,272/- [i.e. 16882.5 grams (32298.3 minus 15415.8)] on which he applied gross rate of 16.22% and made addition of Rs.1,22,21,327/-. On appeal, the Ld.CIT(A) concurred with the action of the AO, which impugned action is under challenge before us.

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 11 :: 12. We find that the impugned addition hinges on the entries of ledger extract of “APPAVU MD” 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 “APPAVU MD” in the books of MJPL, the assessee is noted to have denied the unaccounted transactions and asserted that it has purchased only 15415.8 gms of gold from MJPL (AY 2021-22), and filed relevant evidence like bills/invoices, books of account and payments made through banking channel and VAT/GST documents. However, the AO didn’t accept the denial of unaccounted purchases because out of the gold issued weighing 32298.3 gms as per J-Pack ledger, only gold weighing 15415.8 gms was accounted in the books of the assessee, hence according to AO, balance gold 16882.5 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, was 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/addition for the following reasons.

13.

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 No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 12 :: 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.

14.

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 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 concerned, the assessee had contended that, these could have

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 13 :: 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.

15.

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 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. 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.

16.

Further, 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 it is unsafe to rely on it to make additions, based on unreliable and hence, it is unsafe to rely on it to make additions, based on unreliable ledger. For such a proposition, he invited our attention to the “J-Pack” ledger extracts of “Appavu MD” in the books of MJPL (on sample basis, as per the J-Pack software for Financial Year 2016-17 onwards relevant to AY 2017-18, 2018-19 to 2021-22 found

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 14 :: kept in paper book at page No.61 to 65 for AY 2017-18, Page 195 to 201 for AY.2018-19, Page 348 to 354 for AY.2019-20, Page 497-502 for AY.2020-21 and Page 665 to 666 for AY.2021-22), 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. 143(3)/153C order for the captioned assessment years. He pointed out that ‘bills’ accounted in the assessee’s regular books and paid through bank channels are absent from the J-Pack ledger. According to him, if the J-Pack ledger were a complete or reliable mirror of the assessee’s dealings with MJPL, every bill recorded in the assessee’s regular books ought to find a corresponding entry in J-Pack. However, there are glaring instances of purchase bills not reflecting under the ‘issue column’ of J-Pack ledger, thereby raising serious question of the reliability of the J-Pack ledger relied upon by the AO, to draw adverse inference against assessee. Certain instances, brought to our notice as noted below: (a) Purchase Bills relatable to AY 2017-18: The list of invoices for which the quantity details are not reflecting in J- Pack ledger relied upon by the Assessing Officer is captured below:

(b)Purchase Bils relatable to AY 2018-19: The list of invoices for which the quantity details are not reflecting in J- Pack ledger relied upon by the Assessing Officer is captured below :-

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 15 ::

(c)Purchase Bils relatable to AY 2019-20: The list of invoices for which the quantity details are not reflecting in J- Pack ledger relied upon by the Assessing Officer is captured below :-

(d)Purchase Bils relatable to AY 2020-21: The list of invoices for which the quantity details are not reflecting in J- Pack ledger relied upon by the Assessing Officer is captured below :-

(e)Purchase Bils relatable to AY 2021-22: The list of invoices for which the quantity details are not reflecting in J- Pack ledger relied upon by the Assessing Officer is captured below :-

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 16 ::

The Ld.AR referring to the above list of invoices brought to our notice that the above purchases from M/s Mohanlal Jewellers P Ltd were duly carried out and suffered indirect taxes and the payments were made through proper banking channels. The said purchases were not reflecting in J-Pack software in the relevant date, thereby raises serious question about its reliability. The Ld AR emphasized that when bills, supported by tax invoices and bank payments, do not appear in J-Pack, the J-Pack is neither complete nor a parallel “true” ledger. According to him, it is at best, a private working file unilaterally maintained by a third party (MJPL) with admitted omissions and errors. He submitted that when J-Pack has been shown to omit genuine, undisputed transactions, it cannot be relied upon for accepting or rejecting transactions claimed in the assessee’s books. Hence, no adverse inference can conclusively drawn against the assessee on the strength of such a document.

A. Impossible “Touch %” (purity) figures

The Ld AR further argued that throughout the seized ledger, the “Touch %” (purity) is uniformly recorded as 100.00, a figure that is physically impossible in the jewellery trade. Even refined bullion does not exceed

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 17 :: 99.5%-99.9% purity, and worked jewellery is 91.6% (22K), 75% (18K) or 58.5% (14K). A blanket recording of 100% in certain entries is a hallmark of a software-generated dummy filed cannot be construed a record of real-world transactions. B. Miniscule quantities The Ld.AR further submitted that the ledger also contains transactions of miniscule weight which is illogical especially in view of the fact that the Appellant is dealing in wholesale and further brought us to certain instances of such miniscule quantities are tabulated below: Assessment Date Net Year Weight 2018-18 05.01.2017 0.810 2018-19 06.08.2017 4.960 2018-19 11.02.2018 0.400 2019-20 18.11.2018 0.040 2020-21 28.08.2019 0.060

17.

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.

18.

Moreover, once the assessee had denied unaccounted transactions with MJPL, thereby challenged 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/Suresh

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 18 :: Khatri 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 impugned addition cannot be sustained since assessee has not accepted the contents of the J-Pack ledgers in its entirety qua assessee, and specifically denied having any unaccounted transaction with MJPL and asserted that the entries maintained is unreliable qua assessee. In such a scenario, in order to fasten liability, there should be corroborative evidence, which is absent. Anyway, the entries maintained by the 3rd party in their application software alone cannot be held to be conclusive proof against the assessee, hence, it would be unsafe to fasten addition in the hands of assessee. Therefore, in the light of fore going discussion, we direct the deletion of addition for AY 2021-22. 19. No change in facts or law could be pointed out qua other captioned AYs, hence on the aforesaid reasoning, the grounds of appeal on merits against addition are allowed on the basis of the same reasoning given for A.Y.2021-22. Thus, assessee succeeds and we direct the impugned additions be deleted for all the assessment years.

20.

In the result, appeals of the assessee are allowed. Order pronounced on the 05th day of June, 2026, in Chennai. Sd/- Sd/- (एबी टी. वक�) (एस. आर. रघुनाथा) (ABY T. VARKEY) (S.R.RAGHUNATHA) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�/ACCOUNTANT MEMBER चे�नई/Chennai, �दनांक/Dated: 05th June, 2026. YS

Digitally signed YASHVI by YASHVIR SINGH R SINGH Date: 2026.07.03 17:36:44 +05'30'

ITA No.3396 to 3400/Chny/2025 (AY 2017-18 to 2021-22) RM Appavu Chettiar Jewellery Pvt. Ltd. :: 19 :: आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

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