M/S. RM MAHAVEER JEWELLERY,CUDDALORE vs. DCIT, CENTRAL CIRCLE-3(1), CHENNAI

आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeal), (hereinafter referred to as ‘Ld.CIT(A)’), Chennai-20, dated 17.12.2025 for the Assessment Year (hereinafter referred to as ‘AY’) 2019-20.

“GROUNDS OF APPEAL

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 2 :: 1. The order of the learned Commissioner of Income Tax (Appeals)-20 [CIT(A)] confirming the addition made by the Assessing Officer (AO) is contrary to law, facts, and circumstances of the case. The learned CIT(A) failed to see that addition made under Section 153C is without jurisdiction and deserves to be deleted. 2. The learned CIT(A)-20 failed to see that the Assessing Officer erred in issuing the notice under section 153C of the Income Tax Act, 1961 on 18.03.2024, several months after the search conducted on 10.11.2020 in the case of Mohanlal Jewellers Pvt Ltd, without recording any objective satisfaction or reasons for such delay. The notice issued after an inordinate lapse of time is, therefore, without jurisdiction and liable to be quashed. 3. The learned Assessing Officer has erred in issuing a notice under section 153C even though the seized material/books/documents relating to the appellant were handed over to the Jurisdictional Assessing Officer only on 11.03.2024, i.e., after 01.04.2021. In terms of the first proviso to section 153C(1), this date is the deemed date of initiation of search in the case of an "other person". 4. The learned CIT(A) ought to have see that by virtue of section 153C(3), which mandates that nothing in section 153C shall apply to a search initiated on or after 01.04.2021, the Assessing Officer lacked jurisdiction to invoke section 153C in the appellant's case. Thereforc, the notice issued and all consequential proceedings are void ab initio. 5. The learned CIT(A) failed to see that the Assessing Officer erred in law by taxing the transaction carried out with M/s. M.JPL in the hands of the appellant the appellant firm was incorporated only w.e.f 01.04.2018. The transactions with M/s. M.JPL were carried out in the name of M/s. Mahaveer Jewellery (proprietary concern of Shri R. Mahaveermal Mehta) for till 11.07.2018 which M/s. MJPL provided confirmation too. 6. The learned CIT(A) erred in law and on facts in sustaining an addition towards alleged gross profit on purported unaccounted purchases, in the absence of any legal or factual basis, rendering the addition arbitrary, conjectural, and unsustainable in law. 7. The learned CIT(A) erred in law and on facts in sustaining an addition towards GP in the absence of any incriminating material found during the course of search relatable to the appellant, and based solely on third-party data seized from the premises of another person, which has no evidentiary value against the appellant. 8. The learned CIT(A) erred in law and on facts in sustaining an addition towards GP solely on entries allegedly appearing in a private and unregulated software (JPACK) maintained by a third party, which is neither statutory nor part of the appellant's books, and therefore incapable of forming the basis for estimation of profits. 9. The learned CIT(A) failed to see that the Assessing Officer erred in law in treating ledger entries maintained in the JPACK software seized from MJPL as conclusive evidence against the appellant, without appreciating that the

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 3 :: said software was maintained by a third party and that the appellant had no control over, or access to, the said records. 10. The learned CIT(A) failed to see that the Assessing Officer erred in law and on facts by ignoring the fact that apart from the entries in JPACK, no other corroborative materials were seized pertaining to such entries especially when the appellant has no control over the seized electronic device of a third party. Hence, the additions were made purely on surmise and conjectures and hence are liable to be struck down. 11. The learned CIT(A) erred in confirming the addition made by the Assessing Officer solely based on data extracted from the internally maintained 'JPEG' software, which is merely a customized operational and inventory-management tool used by Mohanlal Jewellers Pvt. Ltd. for internal control purposes. The said software does not constitute the statutory books of account. 12. The learned CIT(A) failed to see that official and legally recognized books are maintained in Tally, which alone reflects all duly accounted financial transactions. In the absence of any corroboration of the JPEG data with the regular books or supporting evidence, reliance placed on such unverified, non-statutory internal software data is erroneous, contrary to settled law, and wholly insufficient to justify the impugned addition. 13. The learned Assessing Officer erred in framing the assessment in complete violation of the statutory provisions and the principles of natural justice by relying upon statements of a third party, which were used adversely against the appellant, despite the appellant's specific request for an opportunity to cross-examine the deponent. The denial of cross- examination vitiates the entire assessment, being contrary to the law laid down by the Hon'ble Supreme Court in Andaman Timber Industries. Consequently, the assessment is bad in law, having been made in breach of natural justice and without adherence to mandatory legal requirements. For these and other grounds that may be rendered at the time of hearing it is most humbly prayed that the Hon’ble Tribunal may be pleased to allow the appellants and thus render please. 3. The main grievance of the assessee-Firm, as pointed out by the Ld.AR is in respect of ground No.5. According to the Ld.AR even though it was brought to the notice of the AO as well as Ld.CIT(A) that assessee- Firm commenced its business operation only from 12.07.2018, [after obtaining PAN (AAXFR9065M), and registration under the Goods and Services Taxes (GST) on 08.07.2018]. Hence, the assessee-Firm’s income should be computed only for the period from 12.07.2018 to 31.03.2019

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 4 :: and asserted that it is answerable to the department about the transactions which happened during that period [i.e. 12.07.2018 to 31.03.2019]. However, according to the Ld.AR the authorities below erred in considering the transaction shown in the ledger of MJPL maintained in J-Pack Software for a prior period i.e. 01.04.2018 to 11.07.2018, when assessee wasn’t legally existing. In this regard, the Ld.AR brought to our notice that prior to the formation of the assessee-Firm, business activities were carried out by shri R.Mahaveermal Mehta, in his individual capacity as the proprietor of M/s Mahaveer Jewellery (PAN No.AACPM6890L), who has filed his ITR/return of income. Hence, for the period from 01.04.2018 to 11.07.2018 all transactions with the M/s MJPL were undertaken by the said proprietary concern, and during this period, purchases aggregating to gold weighing 15,184.19 grams were made and duly recorded in its books of account, supported by ledger extracts and corresponding records. However, the AO during the course of assessment proceedings of the assessee, relying upon the data obtained from J-Pack, alleged that purchases of gold to the extent of 11,315.27 grams were not recorded in the books of the assessee-Firm’s and erroneously treated the same as unaccounted purchases. According to the assessee, it furnished detailed reconciliation demonstrating that the alleged discrepancies doesn’t pertain to the period from 12.07.2018 to 31.03.2019 and may be related to the period from 01.04.2018 to 11.07.2018, during which the assessee-Firm

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 5 :: wasn’t existing. The Ld.AR filed before us statement of Reconciliation which is reproduced as under: - STATEMENT OF RECONCILIATION Total purchase as per JPACK software (1) from 01-04-2018 to 31-03- 40,390.81 2019 Less: - Opening balance (issue side) (2) 2,125.04 Less: - Accounted purchase as per tally ledger of the appellant from 12-07-2018 to 31-03-2019 (3) 26,950.50 Unaccounted purchase as per the assessment order (relating to period 11,315.27 from 01-04-2018 to 11-07-2018) (4) = (1)-(2)-(3) Accounted purchase as per tally ledger of M/s. Mahaveer Jewellery 15,184.19 from 01-04-2018 to 11-07-2018

According to Ld.AR a perusal of the aforesaid reconciliation would show that there was no unaccounted purchases whatsoever in the hands of the assessee-Firm, and hence, the Ld.AR/Ld.CIT(A) erred in not appreciating the aforesaid material facts and has therefore, erroneously presumed that gold weighing 11,315.27 gams was not accounted in its books and hence, made GP addition of Rs.17,29,727/- @5.35%. Hence, according to the Ld.AR the GP addition made in the hands of the assessee is erroneous and therefore, the impugned addition is bad in law.

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 6 :: 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 this 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, the J- pack software also contained ledgers of the parties with whom MJPL inter alia had unaccounted transactions and one of the ledgers was titled “VIJAY BHAI CUDDALORE”. It is seen that, Shri Rajendra 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 had affirmed the version of Shri Kothari. We observe that when the assessee was confronted with this ledger, the assessee-Firm furnished bills and ledger account copy for the purchase of gold from M/s. MJPL for the period from 12.07.2018 to 31.03.2024 and categorically asserted that assessee-Firm came into existence only from July, 2018 upon being allotted its Permanent Account Number (PAN AAXFR 9065 M) as well as registration under the Goods and Services Tax (GST) on 18.07.2018 and commenced its business operation only from 12.07.2018, from which date it began carrying on commercial activities and maintained its regular books of account. The assessee is noted to have also asserted that from

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 7 :: 12.07.2018 to 31.03.2019, all purchases made by it from M/s. MJPL have been duly recorded in the books of account of the assessee-Firm and that its book are maintained in the normal course of business, which are complete and verifiable, and pointed out that AO didn’t find any defects in it.

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 8 :: and treated the same as unaccounted purchases, despite, the assessee- Firm furnishing a detailed reconciliation demonstrating that the alleged discrepancy of amount pertained to the period from 01.04.2018 to 11.07.2018, during which the assessee-Firm was not in existence, and pointed out that the corresponding transactions were duly recorded in the books of proprietary concern M/s. Mahaveer Jewellery, wherein purchase of gold weighing 15,184.19 grams were duly disclosed. Hence, the assessee asserted that there cannot be any unaccounted transactions as alleged by the AO. However, the AO is noted to have brushed aside the contentions of the assessee-Firm and instead noted that the J-Pack ledger showed that a total of 40,390.810 (gross weight) gold ornaments/bullions were issued to the assessee during the relevant year by M/s MJPL. According to the AO the opening balance as on 01.04.2018 is shown as 2125.040 grams gold. And since, the assessee furnished bills and ledger account copy for the purchase of gold from M/s. MJPL for the period from 12.07.2018 to 31.03.2024 to the extent of 26,950.500 grams, the AO concluded that assessee purchased unaccounted gold ornaments/bullion of 11,315.27 grams (40,390.810 grams MINUS 2125.040 grams MINUS 26,950.500 grams) from M/s. MJPL, and the income generated from such unaccounted purchase of gold has to be taxed and hence, applying the GP shown by the assessee at the rate of 5.35% for the year under

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 9 :: consideration, he added Rs.17,29,727/- to the total income of the assessee.

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 10 :: 9. We find considerable force in the assertion made by the assessee- Firm since, we find that the assessee has consistently asserted right from the assessment stage itself that it came into existence only from 12.07.2018 and is noted to have filed the books of account which reflected the business carried out from 12.07.2018 to 31.03.2019 with (PAN AAXFR 9065 M). However, the AO erred in brushing it aside making addition for a period prior to its formation, which action cannot be accepted since it is settled principle of law that “Right income should be taxed in the ‘right hands’ and in the ‘right year’. Reference in this regard can be placed on the decision of Hon’ble Supreme Court in the case of ITO Vs. Ch.Atchaiah [1996] 218 ITR 239 wherein it was held as under : “7. In our opinion, the contention urged by Dr. Gauri Shanker merits acceptance. We are of the opinion that under the present Act, the ITO has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By 'right person', we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression 'wrong person' is obviously used as the opposite of the expression 'right person'. Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the revenue. In our opinion, the language of the relevant provisions of the present Act is quite clear and unambiguous. Section 183 of the Act shows that where the Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is, no doubt, entitled to be relieved of it in accordance with law but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer[Income Tax Officer] has taxed the said income in the hands of another person contrary to law. We may proceed to elaborate.” Hence, when the assessee has shown that from 01.04.2018 to 11.07.2018 the business of dealing in gold jewellery was carried out by proprietary concern M/s. Mahaveer Jewellery (PAN: AACPM6890L) wherein purchases aggregating to 15,184.19 grams of gold jewellery were

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 11 :: carried out and recorded in its books, supported by ledger extracts and corresponding records, still the AO went ahead to tax the alleged unaccounted purchases in the hands of Appellent-Firm, without even verifying the same, which action cannot be countenanced. The AO erred in ignoring the aforesaid assertion; and erroneously proceeded to assume that assessee had carried out unaccounted transactions which is arbitrary and cannot be accepted. Hence, we set aside the impugned action of the Ld.CIT(A) and restore the assessment back to the file of AO for de novo assessment and the assessee is directed to produce relevant records to prove the facts stated above. The Ld.AR has undertaken to furnish the books/ledger of the proprietary concern M/s. Mahaveer Jewellery for the period from 01.04.2018 to 11.07.2018 which shows that it has purchased gold aggregating 15,184.19 grams of gold and reconcile the purchases carried out with MJPL and thus able to prove that transaction appearing in “VIJAY BHAI CUDDALORE” ledger of MJPL has been recorded in the books of account of the proprietary concern M/s. Mahaveer Jewellery (PAN: AACPM6890L). The AO to frame the assessment de nova after hearing the assessee.

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 12 :: in support of the legal issue submitted that the impugned assessment order dated 08.01.2025 passed by AO u/s.153C 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, the assessment-order framed u/s 153C itself was ‘null’ in the eyes of law for AY 2019-20. Hence, the action of AO making additions for AY 2019-20 is wholly without jurisdiction and was issued without authority, non-est in eyes of law.

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 13 :: to the Ld.Counsel, the very act of AO recording ‘Satisfaction Note’ and the consequent issuance of notice dated 18.03.2024 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. 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 addition saddled by passing assessment order u/s.153C read with section 143(3) of the Act is unsustainable, and bad in law, and null in the eyes of law.

Order pronounced on the 05th day of June, 2026, in Chennai.

Sd/- Sd/- (एबी टी. वक�) (बालकृ�न एस) (ABY T. VARKEY) (BALAKRISHNAN. S) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

ITA No.166 /Chny/2026 (AY 2019-20) RM Mahaveer Jewellery :: 14 :: चे�नई/Chennai, �दनांक/Dated: 05th June, 2026. YS 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

YASH Digitally signed by VIR YASHVIR SINGH SING Date: 2026.07.03 09:59:04 H +05'30'