RAM KAILASH,SAHAWAR GATE, ETAH vs. INCOME-TAX OFFICER, WARD-4(3)(3), KANGANJ, KASGANJ

The appeal in ITA No. 159/AGR/2026 for AY 2021-22, arises out of the order of the ld Commissioner of Income Tax (Appeals)-4, Kanpur [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 31.12.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.12.2022 by the Assessing Officer, ACIT, Central Circle, Agra (hereinafter referred to as ‘ld. AO’).

The appeal in ITA No. 155/AGR/2026 for AY 2021-22, arises out of the order of the ld Commissioner of Income Tax (Appeals)-4, Kanpur [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 31.12.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 30.09.2022 by the Assessing Officer, ACIT, Central Circle, Agra (hereinafter referred to as ‘ld. AO’).

Issues involved in both these appeals are identical and hence they are taken up together and disposed of by this common order for the sake of convenience.

Shri Ram Kailash runs a proprietary concern under name and style of Shri M/s Bharat Ghee Store, Kasganj, wherein he carries on the business of trading of desi ghee and skimmed milk powder. The very same business was also carried out by Shri Sudhir Kumar Gupta, who also runs a proprietary concern in the name and style of M/s. Sudhir Kumar and Sons in Kasganj. Both the parties carry on a business at the same address. So effectively it is joint business premises of both the parties. Shri Ram Kailash had filed his return of income for AY 2021-22 on 29.01.2022 declaring total income of Rs. 12,71,410/-, which was duly processed u/s 143(1) of the Act. Shri Sudhir Kumar Gupta had filed his return of income for AY 2021-22 on 29.01.2022 declaring taxable income of Rs. 23,94,910/-, which was duly processed u/s 143(1) of the Act. A joint survey operation was carried out at both the joint business premises on 13.01.2021. In the course of survey, a dairy containing D6 and D3 was found comprising of undisclosed sale transaction of both the parties i.e. Bharat Ghee Store and M/s. Sudhir Kumar and Sons along with a cashbook pertaining to Bharat Ghee Store. The ld AO noted that the total undisclosed turnover recorded in Diary D6 pertaining to both the concerns at Rs. 7,22,68,452/-. This undisclosed turnover was split in the ratio of 53:47

The ld AR before us submitted that there were several calculation mistakes committed by the ld AO while determining the figure of undisclosed sales and placed on record the reconciliation thereon party-wise pointing out the defects. According to the ld AR, the correct amount of undisclosed turnover attributable to both the parties would be Rs. 3,95,68,339/-. The ld AR requested for restoring this issue to the file of ld AO for factual verification of the reconciliation submitted by the assessee so as to arrive at the correct undisclosed turnover. The said reconciliation is enclosed in pages 19 to 24 of the paper book. There is no dispute with regard to the sharing ratio of 53:47 of the undisclosed turnover between the two parties. Further, the ld AR submitted that the gross profit shown by the assessee for the year under consideration was 2.017% and the undisclosed sales transaction reflected in the seized diary also pertain to the current year transaction. Hence, he submitted that the GP rate of 2.01% should be adopted for Shri Ram Kailash and 0.54% should be adopted for Shri Sudhir Kumar Gupta. We find that the average of 3 years gross profit rate for Shri Ram Kailash works out to 3.6% and current year gross profit disclosed by him is 2.017%. For the undisclosed sales made by him, he would have certainly made some extra savings and hence we deem it fit and appropriate to estimate the gross profit

It is also pertinent to note that the ld AO had indeed accepted the turnover disclosed by the assessee in the returns, in view of the fact that the said turnover without being subjected to any cross verification from outside parties or regulatory agencies, have been accepted as sacrosanct. Admittedly, the said turnover disclosed by assessee Shri Ram Kailash included certain amount of cash sales which are reflected in the cash book regularly maintained by the assessee and which has also been impounded by the survey team at the time of survey. Accordingly, we hold that the gross profit of each assessee to be determined as under:-

The Ground Nos. 1 to 4 in the case of Shri Ram Kailash and Ground Nos. 1 to 4 in the case of Shri Sudhir Kumar Gupta are disposed of in the above mentioned terms.

Ground Nos. 5 to 7 raised by the assessee in the case of Ram Kailash are challenging the confirmation of addition of ₹50 lakhs on account of unexplained cash seized by the police authorities on 03.11.2020.

We have heard the rival submissions and perused the material available on record. Admittedly, police authorities seized cash of the assessee of Rs. 50 lakhs on 03.11.2020 and an explanation given by the assessee at that point in time was not found to be satisfactory. A statement was recorded from the assessee u/s 131 of the Act wherein, assessee came forward to offer the undisclosed income of Rs. 50 lakhs on account of cash found. Subsequently, the requisition action u/s 132A of the Act was carried out on 11.11.2020 and the cash amounting to Rs. 50 lakhs was requisitioned thereon from the police authorities. The assessee thereafter retracted the statement given earlier withdrawing the offer of undisclosed income of Rs. 50 lakhs. A survey action u/s 133A of the Act was carried out by the ld AO on 13.01.2021. It is pertinent to note that no assessment was sought to be framed by the ld AO on the requisition action carried out u/s 132A of the Act. The assessment framed for AY 2021-22 was u/s 143(3) of the Act which is pursuant to the survey action carried out during the year under consideration itself and the same is a regular assessment framed for AY 2021-22.

It is important to note that during the course of survey on 13.01.2021, the cash book maintained by the assessee was impounded. In the said cash book, the cash balance as on 03.11.2020 was reflected at Rs. 56,16,375/-. The assessee sought to explain that the cash balance as per books of Rs. 56,16,375/- was available to explain the seized cash by the police authorities of Rs. 50 lakhs on 03.11.2020. This cash balance had emanated out of cash sales made by the assessee which is included as part of total turnover disclosed by the assessee in the return of Rs. 5,45,37,393/-. We have already

Ground No. 7, 9 and 10 raised by assessee are general in nature and does not require any specific adjudication.

Ground No. 8 is regarding the chargeability of interest u/s 234B of the Act which would be consequential in nature. In respect of interest u/s 234C of the Act, the law is well settled that the same shall be charged only on the returned income and not on the assessed income.

The ground Nos. 6, 7 and 8 raised by the assessee Shri Sudhir Kumar Gupta are general in nature and does not require any specific adjudication.

The Ground No. 5 raised by Shri Sudhir Kumar Gupta is with regard chargeability of interest u/s 234A of the Act. The ld AO is directed to examine as to whether the return of income was filed within the due date prescribed under the Act and accordingly determine the chargeability of interest u/s 234A

In the result, the appeals of the assessees are allowed for statistical purposes.