SATYA PRAKASH KHANDELWAL,JAIPUR vs. ITO WARD 3(2), JAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “SMC” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No. 1838/JPR/2025 (Assessment Year:2018-19) Satya Prakash Khandelwal Vs. ITO 1026, Purana Ghat Ward 3(2) Khaniya Agra Road, Jaipur Jaipur �थायीलेखासं./जीआइआरसं./PAN/GIR No:AGZPK 4003 G Appellant .. Respondent Appellant by : Sh. S.B. Natani, CA Respondent by : Mrs. Aarti Rawat, Addl. CIT Date of Hearing 23.06.2026 Date of Pronouncement 30.06.2026 O R D E R The present appeal has been filed by the assessee against the order passed by the Office of the Commissioner of Income Tax, Appeal CIT(A), Jaipur-04 (hereinafter referred to as “Ld. CIT(A)”), under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. In the facts of the present case, on 27.10.2017, inspector of the Department posted in AIU Unit Rajkot, Gujarat ,at Airport stopped two persons with the help of CISF deployed at Air Port and questioned

P a g e | 2 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal them about the contents of the five (5) parcels which they had, but these persons failed to reply satisfactorily and accepted that these parcels contained bullions and Jewellery. These persons were asked to produce the relevant documents to prove genuineness of the parcels intercepted. Since no explanation nor any document were produced to prove the genuineness of the contents in the parcels after providing ample opportunities, thereafter, the parcels were allowed to be opened by one of the persons namely Shri Suresh Kumar, owner of three (3) parcels. From these three parcels another thirty one (31) small parcels and some papers related to booking of the same were found. Out of these thirty one (31) parcels, two parcels had bills which are primary requirement to prove that the goods are accounted for. Further, inquiry was carried out for the remaining twenty nine (29) parcels. Statement of Shri Suresh kumar Jaikishan Bangarwa was taken on oath u/s 131(1A) r.w.s. 131 of the Act. Thereafter, the matter was reported to the Joint Director of Income-tax(Inv.) and proceedings were initiated to convert the inquiry into search action .Accordingly a warrant was issued and executed to Shri Suresh kumar Jaikishan Bangarwa and inquiry initiated u/s 131 of the Act, was converted into search u/s 132 of the Act on 28.10.2017. During the search action total gold/bullion/ jewellery etc aggregating of Rs. 7,33,40,283/ were seized having weight 24383.95 grams. Out of these parcels a parcel having No. J-2 containing Fine gold weighing 581.3 grams valued at Rs. 17,58,432.50 ,as per the valuation report, was seized. The said parcel was sent by

P a g e | 3 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal Riddhi Jewellers of Jaipur belonging to the assessee Shri Satya Prakash Khandelwal, the proprietor of M/s Riddhi Jewellers. 3. Considering the above facts and circumstances a satisfaction note for initiating proceedings u/s 153C of the Act was prepared by the ACIT, Central Circle-2, Rajkot in the case of the assessee for AY 2012- 13 to 2017-18 and 2018-19 and the relevant records and information were forwarded by him to this office vide his office letter No. 112 dated 3.9.2019. 4. The assessee filed his return of income for AY 2018-19 on 31.10.2019 declaring total income of Rs. 18,83,350/-. Accordingly, notice u/s 143(2) of the IT Act, 1961 for the assessment year 2018-19 was issued on 30.9.2019 and duly served upon the assessee. Further notices and query letter were also issued by the DCIT, Central Circle, Patiala. Thereafter, detailed investigations and inquiry was conducted during assessment proceedings, and after considering all the replies and explanations filed by the assessee, the AO held that source of investment in gold found, amounting to Rs.17,58,432/- ,remained unexplained and added the same to the income returned by the assessee. 5. The matter was carried in appeal before Ld. CIT(A), where the assessee raised a legal ground challenging the validity of the assessment framed as well grounds on merits of the addition made, both of which were dismissed by the Ld. CIT(A).

P a g e | 4 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal 6. Aggrieved by the same, the assessee has come up in appeal before me. The assessee before me, has raised a legal ground which reads as under:- 2. That in the facts and circumstances of the case and in law the learned CIT (A) has erred that satisfaction recorded by the learned AO of the searched party was enough under section 153C and in not accepting the plea of the assessee that in the absence of any satisfaction of the learned AO of the assessee the assessment stand vitiated. 3. That in the facts and circumstances of the case and in law the learned CIT (A) has erred in observing that non issuance of notice under section 153C is taken care by section 292BB

With reference to the said ground, the contention made before me, was that, in the facts of the present case, the assessment needed to be framed u/s 153C of the Act, but no notice u/s 153C was issued to the assessee and the assessment on the other hand, was framed u/s 143(3) of the Act. In this regard, he pointed out the chronology of events that,  search action was conducted on 28.10.2017 when the gold consignment was found in Rajkot;  that the satisfaction note of the ACIT Central Circle-2 Rajkot for initiating proceedings u/s 153C of the Act, in the case of the assessee and the relevant records were forwarded on 03.09.2019. Ld. Counsel for the assessee contended that as per the decision of the Hon’ble Apex Court in the case of Commissioner of Income Tax 14 Vs. Jasjit Singh in Civil Appeal No.6644 of 2016 and Others dated 26.09.2023 the date of initiation of search was to be taken as the date on which the documents relating to the assessee and revealed from the

P a g e | 5 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal search action conducted on some other person, were handed over to the AO of the assessee. Copy of the order of Hon’ble Apex Court was placed before me.

P a g e | 6 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal unable to controvert the contention of ld. Counsel for the assessee therefore, that the assessment in the present case needed to be framed u/s 153C of the Act and not u/s 143(3) of the Act as done by the AO. 9. In the light of the above, I have no hesitation in holding, therefore, the assessment framed u/s 143(3) in the present case is in contravention of provisions of law as per the decision of Hon’ble Apex Court in the case of Jasjit Singh (Supra). Since all information pertinent to the assessee was handed over to the AO of the assessee on 03.09.2019, the search action was to be treated as having been conducted on the said date, as per the law laid down by the Hon’ble apex court .The impugned assessment year therefore, i.e. AY 2017-18 fell in the block of 6 years prior to the searched year and assessment therefore, needed to be conducted u/s 153C of the Act. The AO having failed to do so, the order passed is not sustainable in law and is directed to be therefore quashed as invalidly passed. The legal ground raised by the assessee therefore, is allowed. 10. The assessee has also raised grounds of merits of the case which reads as under:- 1. That in the facts and circumstances of the case and in law the order passed by the learned CIT (A) partly confirming the addition of Rs. 6,68,313.25 as against addition of Rs 17,58,432.50 made by the learned AO is not in accordance with law. 4That in the facts and circumstances of the case and in law the learned CIT(A) has erred in confirming the addition of Rs, 6,68,313.25 under section 68 whereas it is settled position of law that provisions of section 68 are not applicable on trading receipts.

P a g e | 7 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal 5. That in the facts and circumstances of the case and in law that the learned CIT (A) has erred in sustaining the addition of Rs. 6,68,313.25 treating the same as unexplained Purchases. 6That the appellant craves to add/alter/amend the Grounds of appeal before the final hearing is completed. 11. The contention of the Ld. Counsel for the assessee before me, was that, during assessment proceedings, the assessee had explained that the gold found in Rajkot was purchased by him from two parties i.e. M/s SK Corporation and M.s Laxmi Metals, all bills of purchase from these two parties were furnished and even the Bank account details furnished, reflecting payment made to the said parties. 12. He pointed out, that the AO conducted inquiry with respect to the purchase made by the assessee from M/s Laxmi Metals by issuing notice u/s 133(6) of the Act to Ms. Sunaina, the proprietor of M/s Laxmi Metals, but incorrectly noted in his order that the notice sent to M/s Laxmi Metals remained un-complied with. 13. He pointed out, that this fact was pointed out to the Ld. CIT(A), during appellate proceedings who sought remand report from the AO and the AO in his remand report agreed that he had wrongly stated the notice issued to M/s Laxmi Metals as remained un-complied with, and he further stated on record, that the said party had confirmed the transaction with the assessee. 14. Noting the facts stated by the AO in his remand report, the Ld. CIT(A) accordingly, deleted the addition made with respect to purchases made by the assessee from M/s Laxmi Metals and confirmed the purchase stated by the assessee to have been made from M/s SK

P a g e | 8 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal Metals holding that the said transaction remained unverified amounting to Rs. 6,68,313.25 15. Ld. Counsel for the assessee pointed out that, the Ld. CIT(A) had failed to notice that no verification exercise was carried out by the AO with respect to the transaction of purchase undertaken by the assessee with M/s SK Metals so there was no question of the verification of the transaction with respect to the said party revealing anything adverse against the assessee. 16. He further, pointed out, that it is a fact on record that the assessee filed purchase bills and details of banking transaction conducted with the said party and no infirmity was pointed out in the same by the authorities below. He therefore, pleaded that the assessee having discharged his onus of proving the genuineness of purchases made from M/s SK Metals and the Revenue having not pointed out any infirmity in the same, there was no question of treating assessee’s explanation of the source of remaining gold emanating from purchases made from M/s SK Metals as unexplained. 17. Ld. DR before me, was unable to point out whether any inquiry was conducted by the AO with respect to the transaction carried out by the assessee with M/s SK Metals, she however relied on the order of the Ld.CIT(A) , contending that the said purchases remained unverified. 18. I have gone through the assessment order and noted the AO to have recorded the fact of having conducted inquiry u/s 133(6) of the Act with respect to the transaction carried out by the assessee with only

P a g e | 9 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal M/s Laxmi Metals. There is no mention in the order of any verification exercise conducted by the AO with M/s SK Metals. Having noted so, and further noting the fact, that the assessee in discharge of his onus to prove the source of gold as purchases made from the M/s SK Metals by filing copies of bills and copy of bank statement and no infirmity being found in the same by the Revenue Authorities, I agree with the ld. Counsel for the assessee, that there was no case with the Revenue for treating the source of the gold claimed to be purchased by the assessee from M/s SK Metals as remaining unverified and hence unexplained. I hold, the assessee to have duly discharge his onus of proving the source of the same as having been purchased from M/s SK Metals. Accordingly, I direct deletion of the addition made to the income of the assessee on account of the gold so purchased amounting to Rs.6,68,313.25/- 19. Therefore, grounds raised on merits are accordingly allowed. 20. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 30.06.2026.

Sd/- (Annapurna Gupta) ACCOUNTANT MEMBER Dated 30.06.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant

P a g e | 10 ITA No. 1838/JPR/2025 Satya Prakash Khandelwal 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT By Order, Asst. Registrar ITAT, Jaipur