DCIT, PATNA vs. RAVI JALAN, PATNA

IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA BENCH, PATNA VIRTUAL HEARING AT KOLKATA Before Shri Laxmi Prasad Sahu, Accountant Member and Shri Sonjoy Sarma, Judicial Member ITA Nos. 448/Pat/2025 Assessment Year: 2017-18 DCIT, Central Circle-1, Patna..……….………………….........Appellant vs. Ravi Jalan………………..……………………………………...Respondent Quila House, Quila Road Patna, Bihar-800 008 [PAN: AGAPJ7714N] Appearances by: Shri Siddharth Agarwal, CA, appeared on behalf of the appellant. Shri A.H Chowdhury, CIT, appeared on behalf of the Respondent Date of concluding the hearing : April 23, 2026 Date of pronouncing the order : May 19, 2026 ORDER Per Sonjoy Sarma, Judicial Member: This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (appeal) (hereinafter referred to as the ‘Ld. CIT(A)’) for the assessment dated 05.06.2025, passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’). 2. The Revenue has preferred the appeal before the Tribunal with a delay of 29 days and has filed an application for condonation of delay explaining the reasons for such delay. We, after considering the reasons stated therein, are satisfied that there was a reasonable cause which prevented the Revenue from filing the appeal within the prescribed time. Accordingly, the delay of 29 days is condoned and we proceed to dispose of the appeal on merits.

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan 3. Brief facts of the case are that, a search and seizure operation u/s 132 of the Act was conducted on 06.09.2018 at the business premises of M/s Jalan’s Gem and Jewellery Creation, Patna, which is a proprietary concern of the assessee, Shri Ravi Jalan, engaged in the business of gems and jewellery. Pursuant to the search proceedings, notice u/s 153A of the Act was issued to the assessee on 11.02.2020. In response thereto, the assessee filed a return of income declaring total income of Rs.27,32,300/-. It was noticed that the assessee had originally filed the return of income u/s 139 of the Act declaring total income at Rs.26,68,210/-. Thereafter, notices u/s 142(1) and 143(2) were issued and complied with by the assessee. Subsequently, assessment u/s 153A r.w.s. 143(3) of the Act was completed determining the total income of the assessee at Rs.1,50,87,251/- after making various additions, inter alia, addition of Rs.1,10,00,000/- relating to Srijan Mahila Vikash Sahyog Samiti, disallowance of depreciation amounting to Rs.5,98,044/- in respect of a flat situated at Pandey Mall, Patna, and estimated profit addition of Rs.6,56,651/- relating to contractual receipts. 3. Dissatisfied with the above order, the assessee filed an appeal before the Ld. CIT(A), where the appeal of the assessee was allowed after considering the submissions and evidence filed by the assessee, and the aforesaid additions were deleted. The findings of the Ld. CIT(A) are as hereunder: - I. It is found that the appellant maintains the regular books of accounts, duly record all the transactions in the regular books of accounts and also gets the books of accounts audited. II. The transactions of purchase, sales and related expenses are recorded in the respective places of the trading account. III. The audited books of accounts was not doubted, not rejected by the Assessing Officer. Rather the books of accounts along with the trading

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan results has been accepted by the AO. The trading accounts includes the sale of goods to the Srijan. IV. The transactions of sales and its corresponding receipt is being deposited in the disclosed bank account found recorded in the audited sets of account of the appellant Sales made to Srijan are duly reflected in the VAT returns. V. During the course of search, invoices issued to Srijan were found during the course of search. The ledger for the financial year were seized at page no 110 of RJ-07. VI. The availability of stock in the form of loose diamond and gold has not been doubted by the AO and it was found in appropriate quantity in the stock summary. The AO rejected the submission of the appellant simply on the reason that item wise stock summary was not maintained. As per the Income Tax Act, the appellant is only required to maintain the stock register in order to arrive at the true and correct amount of income. The law does not require to maintain item wise stock of each and every item of purchases and sales. VII. The provision of section 69A can only be invoked when the appellant is in possession of money which was not recorded in the books of accounts and the assessee offers no explanation thereof. The present case differs as the sales as well as receipts are duly recorded in the audited books of accounts. Section 69A can only be invoked when the possession of money as per section 69A was not recorded in the books. The present case totally differs the transactions are duly recorded in audited books of accounts. The appellant further submits that The Hon'ble Supreme Court has also explained a number of cases that once the assessee furnishes explanation regarding the nature and source of the credit money the AO is not entitled to reject unreasonably simply on the ground that the particular provided are "unconvincing and deserve to be rejected". The AO can reject the particular provided by the assessee only after proper enquiry or bringing on record relevant material or evidences and after satisfaction on the basis of such material or evidences but the AO is not entitled to draw conclusion or inferences without examination and without putting any material on record and simply on the basis of 3

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan conjecture or surmises. The department cannot by merely rejecting a good explanation, convert good proof into no proof. [Sreelekha Banerjee v. CIT, (1963) 49 ITR (SC) 112]. Referring to the provisions of section 69A, the appellant submits that the said provisions are applicable if in any financial year the assessee is found to be the owner of any money and such money is not recorded in the books of account, if any, maintained by him for any source of income and the assessee offers no explanation about the nature and source of acquisition of such money or the explanation offered by him is not satisfactory in the opinion of the assessing officer, However, in the instant case the said provisions are not applicable since the assessee has explained the nature and source of bank deposit of Rs. 111,00,000 which is out of sales made to Srijan duly found recorded (sales bill & financial ledger found & seized) and which are duly recorded in the books of account. The appellant has clearly explained the nature and source by way of necessary evidences on record. Now coming to the issue of addition of Rs. 5,98,080 on account of disallowances of depreciation of Flat at Pandey Mall, Frazer Road Patna. The submission of the appellant recorded on page 32 and 33 has been rejected by the AO stating that on verification it was found that no business activity was carried out from the Flat no 310 at Pandey mall Frazer Road Patna. The Learned AO has mentioned that what sought of verification is done by the AO nor the same has been brought on record while passing the Assessment Order. The appellant has categorically submitted that the said premises is owned property and is being used for the business purposes only. Further, while passing the order the AO has given no finding that the said premises is used for other than business purposes. The whole addition is based on assumption, conjectures and surmises. I find merit in the submission and hereby direct to delete the addition of Rs 1,11,00,000/- on account of receipt of money from Srijan Account treating the same as unexplained money under section 69 of the Income Tax Act and addition of Rs 5,98,080 on account of disallowances of depreciation of Flat at Pandey Mall, Frazer Road Patna. 4

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan Now coming to the issue with respect to addition of Rs 6,56,651/- as estimated profit under section 44AD. During the course of assessment proceedings, the AO has issued 133(6) and information was obtained from Bihar Tourism Development Corporation Ltd. In the reply Bihar Tourism Development Corporation Limited. It has informed that the amount of Rs. 11841708 has been paid to the appellant. Further it was noticed by the AO that from the perusal of the form 26As sum of Rs. 826896 is also appearing as receipt from Bihar State educational Infrastructure Development Corporation Ltd. The Ao has added both the contract receipt 11841706+826896=12668602 and estimated the Income of Rs. 760116 @ 8% on the contractual receipts. The appellant has shown Income of Rs. 1410767 as Income from construction business u/s 44AD. This fact has been mentioned by the Ao in the assessment order at page no. 35 of the order. The appellant has shown higher receipt from Bihar Tourism Development Corporation Ltd which is at Rs 16002830. The same receipt sis also appearing in Form 26AS and TDS has been deducted and claimed by the appellant accordingly whereas Bihar Tourism Development Corporation Ltd has in his reply stated that the sum of 11841706 has been paid. Accordingly, the appellant has shown higher receipt Vis a vis amount determined by the AO. As the appellant has shown income on accrual/ mercantile system of accounting instead of cash system of accounting. The appellant in the written submission has submitted the chart showing the Income shown by the appellant vis-à-vis the receipt as per the information obtained by the AO through section 133(6). Assessment year Receipt shown by Receipt shown by the per appellant as Income the information by the Assessing Officer through section 133(6) 2017-18 16002830.00 11841706.00 2018-19 8041809.00 12202933.00 Total 24044639.00 24044639.00

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan From the perusal of the chart the appellant has been able to demonstrate there is no undisclosed business receipts. The appellant has already offered the receipts based on the accrual system of account whereas the department is taking the Income on cash receipts basis. The appellant has shown gross contractual receipts as the Income appearing in the form 26AS and according in the AY 2017-18, there is excess receipts of Rs. 4161124.00 as compared to the information obtained by the AO through section 133(6) and similarly there is short receipt of Rs. 4161124.00 as compared to the information obtained by the AO through section 133(6) in the AY 2018-19. Accordingly, there is no difference of receipts shown from Bihar State Tourism Development Corporation Limited. I find merit in the submission and hereby direct that the addition of Rs.656651 is to be deleted as the same is based on wrong calculation as well as wrong assumptions. Hence, the grounds taken by the appellant is hereby allowed. 7. In the result, the appeal is allowed. 4. Aggrieved by the above order, the Revenue is in appeal before this Tribunal. At the time of hearing, the Ld. DR strongly submitted that the deletions made by the Ld. CIT(A) are bad in law and that, without considering the findings given by the Assessing Officer, the additions were simply deleted, which is bad in law. Therefore, the instant appeal of the Revenue needs to be allowed by the Tribunal by sustaining the order of the Assessing Officer. 5. On the other hand, the Ld. AR supported the decision of the authorities below. He stated that all the transactions relating to Srijan Mahila Vikas Sahyog Samiti were duly recorded in the regular books of account maintained by the assessee, which were duly audited and accepted by the Assessing Officer. It was submitted that the purchases, sales, and corresponding expenses were duly reflected in the audited trading account, and the sale proceeds received from Srijan Mahila 6

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan Vikash Sahyog Samiti were duly deposited in the disclosed bank accounts of the assessee. It was further submitted that invoices issued by Srijan Mahila Vikash Sahyog Samiti were found and seized during the course of the search proceedings and were reflected in the seized material marked at page 110 of RJ-07. He further submitted that the availability of stock relating to loose diamonds and gold jewellery was never doubted by the Assessing Officer, and the same stood duly reflected in the stock summary maintained by the assessee. According to the assessee, the Assessing Officer rejected the explanation merely on the ground that an item-wise stock summary was not maintained. However, under the provisions of the Income Tax Act, maintenance of item-wise stock records for each and every item is not mandatory so long as the books of account correctly disclose the true income of the assessee. The Ld. AR further contended that the provisions of Section 69A of the Act can be invoked only when the assessee is found to be the owner of money, bullion, jewellery, or other valuable articles not recorded in the books of account, and fails to explain the nature and source thereof. In the present case, the amount of Rs.1,11,00,000/- represented sales transactions duly recorded in the books of account. Therefore, the provisions of Section 69A had no application. Reliance was placed upon the judgment of the Hon’ble Supreme Court in the case of Sreelekha Banerjee, reported in 1963 49 ITR (SC) 112, wherein it was held that mere rejection of an explanation as unsatisfactory cannot automatically justify an addition unless proper enquiry and supporting material are brought on record. With regard to the disallowance of depreciation amounting to Rs.5,98,080/- relating to the flat situated at Pandey Mall, Frazer Road, Patna, the Ld. AR submitted that the said property was owned by the proprietor and was exclusively used for business purposes. The Assessing Officer failed to bring any material on record to establish that

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan the flat was used for non-business purposes. Therefore, the Ld. CIT(A) rightly allowed relief to the assessee. Regarding the addition of Rs.6,56,651/- under Section 44AD of the Act, it was submitted that during the assessment proceedings, information was obtained under Section 133(6) of the Act from Bihar Tourism Development Corporation and Bihar State Educational Infrastructure Development Corporation Limited. The Assessing Officer compared the receipts reflected in Form 26AS with the receipts disclosed by the assessee and estimated the profit rate at 8 per cent on the alleged differential receipts. The Ld. AR submitted that the assessee consistently followed the mercantile system of accounting and had already offered the receipts on an accrual basis, whereas the Assessing Officer considered the receipts on a cash basis merely because the same appeared in Form 26AS. It was demonstrated that excess receipts appearing in the assessment year correspondingly resulted in short receipts in the subsequent assessment year, thereby establishing that there was no suppression of contractual receipts. 6. We have heard the rival submissions and perused the material available on record. We find that transactions with reasons Srijan Mahila Vikash Samiti were duly reflected in the regular books of account maintained by the assessee and which was audited accepted by the Assessing Officer. The sales, purchases and corresponding entries stood reflected in the books of account as well as seized documents found during the course of search. Therefore, the Ld. CIT(A) justify in deleting the addition of Rs.1,11,00,000/- made u/s 69A of the Act. Even the Ld. Assessing Officer did not reject the books of account u/s 145(3) of the Act while disbelieving the transactions were not recorded in the books of account. In such circumstances, the addition cannot be made in isolation. On one hand, the Revenue has accepted books of account and on the other hand, the very same transaction arising from such

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan books cannot be treated as separate unexplained income u/s 69A of the Act. Similarly, with regard to the disallowance of depreciation of Rs.5,98,080/- relating to the flat situated at Pandey Mall, Patna. We find that assessee had established that property was used for business purposes and no material was brought on record by the Assessing Officer to prove otherwise. Accordingly, the Ld. CIT(A) rightly deleted the disallowance. So far as the addition of Rs.6,56,651/- relating to the estimate profit from contractual receipts is concerned. We notice that Assessing Officer has failed to appreciate that the assessee was consistently following mercantile system of accounting whereas the department proceeded on the basis of actual receipts reflected in Form 26AS. The assessee has specifically demonstrated that there was merely a timing difference recognition of receipts and no undisclosed contractual income existed. Accordingly, the Ld. CIT(A) rightly granted relief to the assessee. In view of the aforesaid facts and circumstances, we find that no infirmity in the order passed by the Ld. CIT(A). 7. Accordingly, the order of the Ld. CIT(A) is upheld and appeal filed by the Revenue stands dismissed.

Kolkata, the 19th May, 2026.

Sd/- Sd/- [Laxmi Prasad Sahu] [Sonjoy Sarma] Accountant Member Judicial Member Dated: 19.05.2026. DP, PS

I.T.A. No. 448/Pat/2025 A.Y: 2017-18; Ravi Jalan Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order Assistant Registrar, Kolkata Benches