ASSTT. COMMISSIONER INCOME TAX, UDAIPUR vs. SHREE MAA ICE PLANT, DUNGARPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA No. 734/Jodh/2025 (Assessment Year – 2020-21) Asstt. Commissioner of Income Shree Maa Ice Plant Tax H-75A, M/s Maa Ice Plant, Udaipur Dungarpur – 314001 PAN No. AAEFM 6858 J CO No. 04/Jodh/2026 (Assessment Year – 2020-21) Shree Maa Ice Plant Asstt. Commissioner of Income H-75A, M/s Maa Ice Plant, Tax Dungarpur – 314001 Udaipur PAN No. AAEFM 6858 J

Assessee by Shri Shrawan Kumar Gupta, Advocate (Virtual) Smt. Swapnil Parihar, JCIT (Virtual) Revenue by

Date of Hearing 27.04.2026. Date of Pronouncement 21.05.2026. ORDER DR. MITHA LAL MEENA, A.M.: This appeal by Department and cross objection by assessee is filed against the order of Ld. Commissioner of Income Tax Appeal, Udaipur-2 [hereinafter referred to as CIT(A)] dated 12.06.2025 with respect to assessment year 2020-21.

2 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 2. The Department has raised following grounds of appeal:

 The appellant craves leave to add, amend OR withdraw any of the ground of appellant during the course of appellant proceeding.  Whether on the facts and in-circumstances of the case, the Ld. CIT(A) has erred in deleting addition of Rs. 60,59,032/- made by the AO u/s 69A on account of assessee's failure to justify the stock difference found during the survey u/s 133A of the I.T. Act?  Whether on the facts and in circumstances of the case, the Ld.CIT(A) has erred in deleting the addition of Rs. 60,59,032/- made by the AO u/s 69A without appreciating the fact that assessee had failed to submit any reconciliation of the stock register with physical stock of goods and merely relying upon the assessee's, written submission without any confirmation from the courter parties?  Whether on the facts and in circumstances of the case, the Id. CIT(A) has erred in allowing the appeal of the assessee by taxing the unaccounted sales of Rs. 2,46,03,436/- detected during the course of survey at normal rates as against the addition made by the. AO u/s 69A of the I.T. Act on this issue and taxing the same at special rates u/s 115BBE of the Act? 3. The assessee has raised following grounds of appeal in its cross objection:  The impugned order u/s 143(3) dated 30.03.2022, as well as notices are bad in law, illegal, invalid, void- 1 ab-intio on facts of the case, for want of jurisdiction, and also barred by limitation and various other reasons and hence the same may kindly be quashed.  Rs. 2,46,03,436/-: The Id. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the addition of Rs.2,46,03,436/- made by the ld. AO on account of allegedly unaccounted sales by taking this as undisclosed sales. The ld. AO also grossly erred in making the addition of entire alleged undisclosed/unaccounted sales in place of only N.P. rate, if any required. Hence the addition so made by the ld.AO being absolutely, contrary to the provisions of law and facts of the case and not in conformity with the law, hence the same may kindly be deleted in full.

3 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21  The ld. AO has grossly erred in law as well as on the facts of the case in charging interest u/s 234 A, B,C. 3 The appellant totally denies it liability of charging of any such interest. The interest, so charged, being contrary to the provisions of law and facts, may kindly be deleted in full.  The appellant prays your honors indulgence to add, amend OR alter all OR any of the grounds of the cross objection on OR before the date of hearing.

4 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 5. Being aggrieved with the Assessment order, both Department and the assessee is in appeal before us. First, we are taking up the appeal of the Revenue. 6. In the first and second ground, the Department has challenged the order of Ld. CIT(A) in deleting the addition of Rs. 60,59,032/- made by the AO u/s 69A of the Act. The contentions of the appellant are being discussed as under:  A survey u/s 133A was conducted on 28.02.2020 at the business premises of the assessee. As per books of accounts maintained, it was found that cash books were written up to 15.02.2020. The statement u/s 131 of the Income Tax Act 1961 was recorded on oath of the assessee. The assessee was engaged in processing and trading of milk and milk products. The only source of income of the assessee is by way of sale of milk and its products, as mentioned by the AO in paragraph 3 of the assessment order. During the course of survey proceedings, it was found that as per books of accounts, the closing stock value was shown at Rs. 96,19,400/- whereas on physical verification the stock was found at Rs. 35,60,368/-. Thus, there was a shortage of closing stock value amount to Rs. 60,59,032/- (9619400-3560368). During the course of statement recording, Sh. Dungarlal Patel, the partner of the assessee stated that the shortage of stock found is the milk that was sent to M/s. Gayatri Dairy Products Pvt. Ltd. and M/s Prisha Food and Dairy Products Pvt. Ltd. Ahmedabad for manufacturing of milk powder.  The Assessing Officer made an addition of Rs. 60,59,032/- u/s 69A of the IT Act 1961 treating it as undisclosed sales due to following reasons – (a) The assessee has not furnished a satisfactory explanation and no documentary evidence with regard to difference of stock was submitted. (b) The assessee has not presented the two parties M/s Gayatri Dairy Products Pvt. Ltd. and M/s Prisha Food and Dairy Products Pvt. Ltd. and could only produce account confirmation from the parties.

5 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21  The appellant has submitted his written submission during the appellate proceedings. He has submitted that in reply to notice u/s 142(1) dated 10.03.2022, it has been mentioned that 1,72,600 Ltr of Milk as on 28.02.2020 is lying with the job workers i.e. Gayatri Dairy Products and Prisha Food & Dairy Products. The appellant has made stock journal entry for conversion of milk to milk powder. Hence, there is a reconciliation difference and not the physical difference in stock. Confirmation from job workers regarding stock lying with them was attached with the said reply. The appellant pleaded that it was not within the powers of appellant to produce two parties of job workers in front of the assessing officer for recording of statement. He could only produce the stock movement register and the ledger of Shree Maa Ice Plant in the books of M/s Gayatri Dairy Products Pvt. Ltd. and M/s Prisha Food and Dairy Products Pvt. Ltd. along with their audited accounts. The appellant has further contended that the AO has ignored the modus operandi of the assessee’s business in reply question no. 21 of the statement recorded during the course of the survey, he has already answered that entry of sale and purchase between 15.02.2020 to 28.02.2020 is pending as the accountant was out of town and some details were to be collected from collection centre. In line of his business, it is common practice that in the winter season, milk is sent for conversion into milk powder as the production/procurement of milk is in excess of sale and consumption and in the summer season, milk powder is again converted into milk. The appellant has challenged the decision of the AO to treat the stock found short as undisclosed income u/s 69A as section 69A deals with ‘owner of any money, bullion, jewellery or other valuable article not recorded in the books of account’. The appellant has pleaded that in his case the stock has been found short and is not covered by the above definition u/s 69A of the IT Act 1961. The assessing officer has neither doubted the purchase of milk of 1,72,600 ltrs, nor the conversion charges of milk into milk powder debited in P & L account. However, the short stock has been considered as undisclosed income without giving effect to corresponding purchases linked to it. The

6 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 appellant has stated that as he has already taken this stock in the stock register as well as considered it in his sales, addition of the same amount of milk leads to double taxation which should have been avoided by the AO.  After considering the assessment order along with appellant submission, I have reached the decision that the assessing officer has hurriedly made the addition without going into the basic facts of the case as well as evidence produced by the appellant. The appellant has maintained his stand from the survey proceedings to the assessment stage that the ‘stock found short’ was goods that have been sent for ‘job work’. The necessary entries have been made in the stock movement register. The charges have been debited in the P & L account for conversion of milk into milk powder; the ledger and parties confirmation have been submitted by the appellant confirming the transaction. The appellant has been following the same modus operandi year after year. Merely because the appellant could not produce the parties for record of statement before AO cannot be accepted as the reason for addition of undisclosed income u/s 69A. The assessing officer should have summoned these parties independently. The appellant has submitted the audit accounts of these two parties before the AO which was not considered by him. Hence, the appellant has been able to discharge onus laid upon him by the assessing officer to prove the genuineness of these transactions. So, the ground of appeal is accepted and the addition of Rs. 60,59,032/- is deleted without going into the merits whether the addition should have been made u/s 69A of the IT Act or not. Hence, the ground of appeal filed by the assessee is accepted.”

7 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 survey u/s 133A of the Income Tax Act. The Ld. DR contended that the assessee did not furnish satisfactory explanation or documentary evidences before the AO as regards to the difference of the stock amounting to Rs. 60,59,032/- as being explained that 1,72,600 litres of milk was sent to Prisha Food and Dairy Products Pvt. Ltd. And Gayatri Dairy Products Pvt. Ltd. for making of milk products. The Ld. DR further contended that the Ld. CIT(A) has deleted the addition without appreciating the fact that assessee failed to submit any reconciliation of the stock either with reference to the stock register vis-à-vis physical stock of the food found during survey and merely relied upon the assessee’s written submissions without confirmation to the counter parties. Further, the Ld. DR strongly relied on the observation of the Assessing Officer (in short “the AO”) that the reconciliation difference could not be explained by the assessee with documentary evidences.

8 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 appellate proceedings with documentary evidences as regards to the 1,72,600 litres of the milk as it was lying with the job workers i.e. Prisha Food and Dairy Products Pvt. Ltd. And Gayatri Dairy Products Pvt. Ltd. as on 28.02.2020. The AR has argued that it was satisfactorily explained before the AO and the Ld. CIT(A) that the difference in stock was merely a reconciliation stock difference and it was not a physical difference in the stock. In support, the appellant has failed confirmation of the job worker parties as above regarding stock lying with them. He pleaded that the decision of the Ld. CIT(A) in deleting the addition of Rs. 60,59,032/- based on reconciliation of stock may be sustained.

9 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 milk powder, duly supported with the entries made in the ledger accounts and parties confirmation of the transaction as detailed submitted by the assessee. It is noted that appellant has been following the same modus operandi year after year. In our view, the Ld. CIT(A) has been justified in holding that merely because the assessee could not produce its parties for record of statement before the AO cannot be a reason for addition of the undisclosed income u/s 69A of the Act. If the parties statement was required to be recorded, the AO ought to have summoned these parties independently to disprove the claim of the assessee.

10 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 12. In the third ground of appeal, the Department objected to the order of the CIT(A) in allowing the appeal of the assessee in charging tax at normal rate on addition of Rs. 2,46,03,436/- as the addition was made by AO u/s 69A of the IT Act.

“The assessing officer has mentioned the provision of section 69A in his assessment order and in para 7.4, has concluded that that the assessee is found to be the owner of money of Rs. 2,46,03,436/- and such money being not recorded in the books of account is taxed under purview of section 69A r.w.s. 115BBE. The appellant has has filed written various case laws in his favour. The whole contention of the assessee relies on the fact that the source of unrecorded receivables is the

11 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 unrecorded sales which have been explained by the assessee and thus the necessary nexus with the business of the assessee has been established. There is nothing on record to show that the firm had any source of income other than business. Various judicial authorities have dealt with the issue of unrecorded sales or excess stock found during the course of search/survey and has reached certain parameters for deciding the issue - Whether the assessee has any other source of income/interest in any other business/concern than the regular course of business carried out by him. Whether the assessee has been able to provide necessary explanation about the nature and source of such unrecorded transaction, during the course survey/search or post survey/search proceeding. Whether there is any physical distinction between accounted and unaccounted stock. Whether revenue has been able to make any such distinction during the survey or assessment proceedings. In the case of the appellant, the AO has not been able to pass any adverse opinion regarding any other source of income of the assessee neither he has been able to bring on record any adverse material related to it. The business income is the only source of income of the appellant and the 'short stock' as well as unrecorded sale of milk found during the survey are related to business of assessee partnership firm. The revenue has accepted the surrender on account of unrecorded sale which proves that it was generated from the sales/receipts made by the appellant during normal course of business. Although, the said income was not recorded in the books of the assessee firm but the source of the same is related to the business of the assessee. This is a case where source of investment/expenditure is clearly identifiable and undisclosed sales or 'short stock' has no independent existence of its own and needs to be taxed under the head business income.”

12 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 15. The Ld. DR for the Revenue submitted that the CIT(A) was not justified in allowing the claim of the assessee by taxing at normal rate the amount of unaccounted sales of Rs. 2,46,03,436/- as being deducted during the course of survey, as the addition was made by AO u/s 69A of the IT Act by charging tax at special rates u/s 115BBE of the IT Act.

13 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 higher tax rate under the provisions of Section 115BBE of the Act by the AO. The Ld. AR contended that the Ld. CIT(A) has been justified by following the Rajasthan High Court in the case of CIT Vs. Bajargan Traders in ITA No. 258/2017 dated 12.09.2017 while holding that in the case of appellant, the Revenue has not been able to identify any source of income except sale of milk which could prove that the undisclosed stock is related to undisclosed sales to be taxed as per provisions of Section 69A r.w.s. 115BBE of the IT Act. The Ld. AR emphasized that the Ld. CIT(A) was justified in directing the AO to treat the undisclosed surrendered income of Rs. 2,46,03,436/- under normal taxation rates and not as per provisions of Section 115BBE of the IT Act.

14 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 CIT(A) was justified in following the decision of Hon’ble jurisdictional Rajasthan High Court in the case of CIT Vs. Bajargan Traders (supra) in directing the AO to charge tax at normal tax rates as against the special tax rate prescribed u/s 115BBE of the IT Act.

CO No. 04/Jodh2026

15 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 who was asked to verify the unaccounted sales with the books of accounts maintained her replied to the question no. 22 that the details of the unaccounted sales and corresponding expenditure are recorded partly in the ‘Kaccha Cash Book’ which have not been entered in the computer, and that no sale bills were issued to the customers but they have received the payment. The assessee agree to pay tax on unaccounted sale of Rs. 2,46,03,436/- in addition to current income. The AO further stated that the assessee was asked to explain the unaccounted sales of Rs. 2,46,03,436/- as admitted during the course of survey proceedings. However, the AO being not satisfied with the reply of the assessee held that the assessee has offered the amount of Rs. 2,46,03,436/- for taxation as normal business income from unaccounted sales. Accordingly, he made an addition of Rs. 2,46,03,436/- as unaccounted income and apply provisions of Section 69A of the Act charging special tax rate u/s 115BBE of the Act.

“During the course of survey proceedings, it was found that the assessee maintained his books of accounts on computer as well as on one 'Kaccha Cash Book'. As per this cash

16 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 book, it was noticed that the assessee was recording day to day transactions of sale and expenditure details. On comparison of accounts details on computer, it was found that the milk was sold to few restaurants, sweet makers and schools which was not entered in the books of accounts. Hence, details were prepared totaling to Rs. 2,46,03,436/- and the partner of the assessee also accepted that these kachhi cash books were not entered in the regular books of accounts and he accepted to pay tax on this unaccounted sales of Rs. 2,46,03,436/-. The assessee has submitted reply dated 14.3.2022 stating that "during the course of survey proceedings, unaccounted sales of Rs. 2,46,03,436/- has been admitted by the assessee. Regarding that we would like to clarify that this was the sales made by us to various parties during the concerning financial year, of which no sales bills were issued till date of survey proceedings. The sale proceed from unbilled revenue is used for discharging the liabilities of which no entries has been done in books of accounts regarding any payment. Hence, till the date of survey proceeding, accounted sales or income from such sales was kept as a fictitious creditors or outstanding liabilities. The unaccounted sales has been recorded as "Additional Business offered during survey proceeding" by writing off fictitious liability". During the course of appellate proceedings, the appellate has submitted that, due to wrong/improper advice the assessee has shown entire sales as income in the Return of Income. When before making the sale the purchase is required and without a purchase sale cannot be done in case of trading business and other direct or indirect expenses are also incurred. The appellant has offered to tax his unrecorded sales and turnover of Rs. 2,46,03,436/- at net profit of 1.29%. The appellant has also submitted various case laws in his favour along with written submission. After going through the assessment order, written submissions along with the case laws submitted, the ground of appeal taken by the appellant seems to be an 'after thought'. The assessee during the course of survey proceedings was found to be maintaining two books of accounts and his statement was recorded in which he has confirmed and

17 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 offered this amount of Rs. 2,46,03,436/- as undisclosed sales for taxation. Even during assessment proceedings the assessee has reiterated the same stand and in his reply dated 14.03.2022 in response to notice u/s 142(1), he has himself clarified that the undisclosed income of Rs. 2,46,03,436/- does not have any other hidden expenditure or purchase expenditure involved. Therefore, this amount has been offered by the assessee under different head and not as a part of 'Turnover' and hence the submission of the appellant is not being accepted to apply GP/NP ratio on this amount as all the expenditures has already been factored by the appellant as evident from the statement recorded during survey proceedings as well as post survey proceedings. The appellant has taken an altogether different view during the appellate proceeding without submission of any new document or evidences. It is a case of an afterthought and hence the ground of appeal filed by the assessee is rejected.”

18 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 “During the course of survey proceedings, unaccounted sales of Rs.2,46,03,436/-has been admitted by the assessee. Regarding that we would like to clarify that this was the sales made by us to various parties during the concerning financial year, of which no sales bills were issued till date of survey proceeding. The sale proceed from unbilled revenue is used in discharging the liabilities of which no entries has been done in books of accounts regarding any payment. Hence till date of survey proceeding unaccounted sales or income from such sales was kept as a fictitious creditors or O/s liabilities. The Unaccounted sales has been recorded as "Additional Business Income offered during Survey proceeding" by writing off fictitious liability."

19 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 unaccounted sales was to be offered for taxation in the return of income. He argued that neither the CIT(A) nor the AO has contradicted the contents of the affidavit filed by the assessee and, therefore, the AR contended that the facts narrated in the affidavit may be accepted. The AR argued that it is well settled law that in the cases where affidavit has been filed yet the content not being rebutted by the Income Tax Authority [AO or the CIT(A)], the facts mentioned therein have to be read as the facts binding upon the Income Tax Authorities. In support, he placed reliance on the judgment delivered by the Hon’ble Apex Court in the case of Mehta Pareek & Co. 30 ITR 181 (SC), Hon’ble Delhi High Court in the case of CIT Vs. Lunard Diamond Ltd. 281 ITR 1 (Del.) and the recent judgment delivered by jurisdictional Rajasthan High Court in the case of CIT Vs. Bhawani Oil Mills P. Ltd. 239 CTR 445/49 DTR 212 (Raj.) where the Hon’ble jurisdictional High Court has held that contents of affidavit could not be treated as of a lesser importance than the statement given by the creditor before the AO. The Ld. AR pleaded that the addition confirmed by the CIT(A) without appreciating the facts and controverting the statements of the assessee may be deleted.

20 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 nowhere mentioned that this amount offered was not the part of the turnover. Meaning thereby that the income surrendered by the assessee has to assessed as the business income on account of net profit out of the unaccounted sales amounting to Rs. 2,46,03,436/- computed as per the ‘Kaccha Cash Book’ maintained by the assessee which were not recorded in the books of account maintained on the computer. In our view, by no stretch of imagination, the unaccounted sales as admitted by the assesse and accepted by the Department from the stage of survey proceedings to the assessment and the first appellate authority would be treated as part of the total turnover unless the contrary is proved with the support of the cogent material evidence on record by the Department. In the present case, Department fails to bring on record any documentary evidence to establish that the unaccounted sales computed as per the ‘Kaccha Cash Book’ were not forming part of the total turnover or out of the purchases already recorded in the books of account of the assessee. It is evident from the record that the unaccounted sales disclosed by the assessee has been made out by the unaccounted purchases and the expenditure incurred because without any purchases, no sales could be made as per the standard accounting principles of law. The Ld. CIT(A) observed that the appellant has taken an

21 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 altogether different view during the appellate proceedings without submission of any new document or evidence is factually incorrect and we do not find any presumption of afterthought on the part of the assessee.

“It has to be noted, however, that beyond these calculations of figures, no further scrutiny was made by the Income-tax Officer or the Appellate Assistant Commissioner of the entries in the cash book of the appellants. The cash book of the appellants was

22 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the Appellate Assistant Commissioner, nor the Income-tax Officer, who was present at the hearing of the appeal before the Appellate Assistant Commissioner considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits. This being the position, the state of affairs, as it obtained on 12th January, 1946, had got to be appreciated, having regard to those entries in the cash books and the affidavits filed before the Appellate Assistant Commissioner, taking them at their face value. The entries in the cash books disclosed that, taking the number of high denomination notes at 18 on 2nd January, 1946, there came in the custody or possession of the appellants after 2nd January, 1946, and up to 12th January, 1946, 49 further notes of that high denomination, making 67 such notes in the aggregate, out of which 61 such notes could be encashed by the appellants on 18th January, 1946, through the Eastern Bank. mere calculation of the nature indulged in by the Income-tax Officer or the Appellate Assistant Commissioner was not enough, without any further scrutiny, to dislodge the position taken up by the appellants, supported as it was, by the entries in the cash book and the affidavits put in by the appellants before the Appellate Assistant Commissioner." Considering the reconciliation and cash flow statement filed by the assessee along with family settlement deed and affidavit of assessee's wife, wherein she owned responded of having deposited of cash out of her owned source and saving., Therefore, without controverting the fact stated of affidavit by the wife of the assessee, the addition made by the lower authorities even for an amount of Rs. 12,87,100/-is also not sustainable in the hands of the assessee and therefore, the same is directed to be deleted."

23 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21

24 ITA No. 734/Jodh/2025 & CO No. 04/Jodh/2026 Asst. Year: 2020-21 Order pronounced in the open court on 21/05/2026.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 21/05/2026. Nimisha Sr. PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File BY ORDER,